Description of McDonald’s and its Asian Division
Starting off as a small burger restaurant in the U.S., McDonald's grew to become the world’s leading fast-food company with more than 36,000 restaurants in more than 100 countries. It is the world’s largest restaurant by revenue with a revenue of 21 billion as of 2018 and serving more than 69 million customers across the globe ( McDonald’s, 2013) . Revenues come from food sales, royalties and rent paid from franchises. The chain of restaurants is best known for its fries, hamburgers, milkshakes, desserts, and breakfast items among others. in response to consumer changing behavior with respect to the maintenance of good health, the firm has now added salads and fruits as part of their menu ( McDonald’s, 2013) . With a well-established customer base, the company seeks to expand its operations with the expanding markets in Asia.
After the food safety scare in 2014, McDonald's refocused its expansion strategy in Asia to increase its operations and its customer loyalty. The firm works with Morgan Stanley to find local partners to expedite its investment growth in the region. As of 2016, stores in China and Korea accounted for 7.8% of the total outlets in the world. However, they are faced with stiff competition from other international brands such as Burger King Yum Brands, which owns KFC and Pizza Hut, as well as the ever-changing consumer behaviors. As a result, Asian divisions of McDonald's allow local management to oversee operations in order to create responsibility and foster quick decision making.
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Company’s Mission and Social Responsibility
McDonald's mission is to be the consumers’ favorite place to eat and drink. Global operations are aligned with a common strategy of a plan to win to create and continuously improve customer experience with respect to their product offers, promotional strategies, place, prices, and people ( McDonald’s, 2013) . Additionally, apart from creating employment to the locals, the company takes its social responsibility seriously as they always look for ways they would reduce and recycle in the restaurants. For instance, they use low energy LED light bulbs and other energy saving methods for both the stores and the delivery trucks ( McDonald’s, 2013) . They also recycle cardboard boxes for packaging their products in their stores.
Role of the Global Manager
Joe Erlinger is the firm’s global manager who has the responsibility of managing the international market. His multidimensional role involves engaging his technical, people, and soft skills in order to operate across international borders ( McDonald’s, 2013). This means that the role goes beyond organizing and overseeing operations to forging relations and seeking better global opportunities to invest in. It also means that global managers are at the forefront of research in order to strategically place the business in a good position.
Current Performance of McDonalds Asia
High performing Asian countries include China, Korea, Japan, and India. Stores in China, Hong Kong, as well as South Korea account for 70% of the total 2,300 stores in Asia as of 2016. Due to the region-wide reception of the firm’s food products, the company aims at opening more stores in the East region (Sharma, 2016). According to Garcia (2017), even as U.S. store sales declined, Asia reported a 2.7% increase with China and Japan leading. The strong performance in China demonstrated that the firm has improved profitability. Due to the expanding markets and high performance in the area, the company seeks to increase its franchise operations to 95% of its business (Sharma, 2016). The company would be able to open up new stores at a faster rate than it can by launching normal corporate branches.
McDonald’s Business Strategy for Asia Division
The reinvigorated burger restaurant chain focuses its strategy on having every store ran by local partners. The turnaround strategy is believed that it will increase its value and unlock its growth potential. The franchising model seeks to reduce operational costs such as general and administrative expenses (Sharma, 2016). Its capital requirements will also reduce significantly due to the incorporation of the local partners. Locals have a firm grasp on the trends and tastes of their area as opposed to parent companies that act and operate alone. They are also better equipped in creating menus that incorporate their culture alongside innovative ideas that would snatch market shares from domestic firms and other home-grown menus (Sharma, 2016). The aggressive strategy also secures the supply chain and the integrity of suppliers that will go a long way in protecting the company’s brand image. This is mainly because franchises focus more on the supply chain.
Decision-Making Model and Negotiation
Since information is critical in any decision-making process, the firm’s research is extensive. This is because all effective decisions are often based upon accurate, relevant, and timely information provided to them. Inaccurate and unreliable information leads to poor planning, a wrong priority of needs, as well as unfitting decision making ( Dugmore & Wang, 2018 ). Decision making at the firm is, therefore, made after information is retrieved from extensive market research. However, the company failed in 2014 to contain rumors about meat poisoning that negatively affected its sales in the region ( Dugmore & Wang, 2018 ). If the firms had carried out enough research and shared it with the people, the fears would have been quelled down. On the other hand, negotiation is done by senior managers. However, negotiations are done with legal representatives of the firm present to take care of any requirements. Depending on the region, local representatives are also there to reduce the possibilities of language barriers ( Dugmore & Wang, 2018 ). However, small negotiation such as procurement would be undertaken by representatives from their respective departments. Negotiation is cross-cultural in order to accommodate different cultures in Asia.
Performance Indicators for Asia
Key performance for the Asian market would be a comprehensive set of social, economic, and environmental factors. On one hand, sociocultural factors such as the gradual acceptance of westernization would indicate that the Asian market is rapidly growing. Economic indicators of good performance would be high-income levels and the rate of urbanization ( Hou, Liu, Fan, & Wei, 2016). This is because McDonald's seeks to expand its stores to almost every region in Asia. Therefore, the more cities there are, the more likely it would be for McDonald's to open up more stores and increase their sales revenue. The company stores are likely to be opened in urban settings where life is moving fast and people do not have ample time to prepare home-cooked meals. On the other hand, high-income levels would increase consumer purchasing power and the overall sales revenue for the firm. low levels of earnings would make it difficult for Asians to buy McDonald’s food products. Finally, environmental factors such as recycling used products and using energy saving methods would indicate that the firm set the pace for sustainability practices in the CSR strategy. For instance, adopting cleaner fuel in cars would demonstrate the firm’s corporate leadership influence is high and likely to attract more consumers.
Role of a Global Management Team in McDonald's
According to Presbitero and Toledano (2018), t he global management team has specialization in different skills in business, functional, and country divisions. Business managers are often locals in Asia who are able to run the business since they are well accustomed to the Asian culture and way of life. Country managers are also locals since they are well familiar with the laws and policies of practicing business in their respective regions. On the other hand, functional managers oversee the operations of a particular department and may not be locals but can also be Americans since it requires expertise in respective departments. For instance, the head of finance in Tokyo, Japan, could be of any nationality but should have skills in financial management. The global management team would then work together and report to the global manager who is also recognized as the president of international operated markets.
Cultural Issues
Cultural issues are considered important particularly when designing the menu. Since the aim is to attract a larger portion of the market, every firm should be able to align its operations and create products that fit with the needs of consumers ( Schütte & Ciarlante, 2016) . This means that language on the packages, customer services, and even promotional activities would consider the culture of the consumers. At the same time, understanding different cultures would help strengthen employee relations and ties within the firm towards meeting one goal.
Management in a Digitalized Environment
Managing the business in a digitalized environment would require trained personnel and IT experts who would carry out the procurement, logistics, promotion, and even sales ( Kane, Palmer, Phillips, & Kiron, 2015). A company website would be open where consumers would place their orders and monitor their delivery from the stores. On the other hand, social media sites would be created where the firm’s team would engage with consumers to gauge the performance of the food products as well as gather feedbacks and complaints while monitoring consumer changing behaviors. However, a strong and almost impenetrable Information system would be established to facilitate communication from other stores across the globe and protect crucial data ( Kane, Palmer, Phillips, & Kiron, 2015) .
References
Dugmore, P., & Wang, Y. (2018, September). Product Design in Food Industry-A McDonald’s Case. In International Workshop of Advanced Manufacturing and Automation (pp. 448-452). Springer, Singapore.
Garcia, T. (2017). McDonald's reports same-store sales strength in Asia as U.S. struggles. Market Watch. Retrieved from https://www.marketwatch.com/story/mcdonalds-reports-same-store-sales-strength-in-asia-as-us-struggles-2017-01-23
Hou, M., Liu, H., Fan, P., & Wei, Z. (2016). Does CSR practice pay off in East Asian firms? A meta-analytic investigation. Asia Pacific Journal of Management , 33 (1), 195-228.
Kane, G. C., Palmer, D., Phillips, A. N., & Kiron, D. (2015). Is your business ready for a digital future?. MIT Sloan management review , 56 (4), 37.
McDonald’s (2013). Mission & Values. Available at: http://www.aboutmcdonalds.com/mcd/our_company/mission_and_values.html
Presbitero, A., & Toledano, L. S. (2018). Global team members’ performance and the roles of cross-cultural training, cultural intelligence, and contact intensity: the case of global teams in IT offshoring sector. The International Journal of Human Resource Management , 29 (14), 2188-2208.
Schütte, H., & Ciarlante, D. (2016). Consumer behaviour in Asia . Springer.
Sharma, A. (2016). The logic behind McDonalds Asia strategy. Motley Fool. Retrieved from https://www.fool.com/investing/general/2016/04/28/the-logic-behind-mcdonalds-asia-strategy.aspx
