McDonald's in China
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Case Code: BSTR305 Case Length: 20 Pages Period: 1998-2008 Pub Date: 2009 Teaching Note: Available |
Price: Rs.300 Organization: McDonald's Industry: Food and Beverage Countries: China Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"China is certainly a significant market for McDonald's, and they're focused on seizing that."
- John Owens, Analyst, Morningstar Inc. in 2007.
"You have to remember that in places like Australia and Spain it took us 10 to 15 years to make money. China is in its 15th year and it's making very good money; it just could do better."
- Matthew Paull, McDonald's Chief Financial Officer, in 2005.
Introduction
McDonald's Corporation (McDonald's), one of the world's largest fast food chains, disclosed in its Annual Report, 2007, that it served one billion additional customers globally in the year 2007 than in 2006 because of its reasonably priced menus such as Ein Mal Eins in Germany, the Dollar Menu in the US, and the Value Menu in China.
These menus typically included eight to ten items including entrees, side dishes, desserts, and drinks which could be assorted by customers to create a meal or a quick snack.
According to the report, Asia/Pacific, the Middle East, and Africa (APMEA) contributed to 16 percent of the company's total revenues, half of which was from Australia, China, and Japan collectively. China was one of the key markets for McDonald's as it contributed significantly to the company's revenue and operational income.
McDonald's entered China in 1990 with its first restaurant in Shenzhen. Since then it began to expand steadily in the country. For McDonald's other than its home market - the US, China was the largest growth market with 960 restaurants and over 60,000 employees as of 2008.
In China, McDonald's became a symbol of modern lifestyle. Though it remained American in terms of menu, services, and management, the company brought in variations in its products and ingredients to suit the Chinese palate and culture.
McDonald's strategic plan in China was to focus on core menu extensions, convenience, and value. The company planned to open 125 restaurants in 2008, 150 in 2009, and 175 in 2010 across China with the focus on drive-thru restaurants and round the clock service restaurants.
In China, McDonald's biggest competitor was Yum! Brands Inc. (Yum Brands) that operated Kentucky Fried Chicken (KFC), Pizza Hut, and Taco Bell restaurants.
McDonald's also had competition from local fast food restaurants. The bird flu10 and SARS11 epidemics threw up a tough challenge for McDonald's - food safety...
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