managing across culture

Managing across cultures

Internationalization and globalization are considered fundamental features of the new

millennium; they affect all actors of economic life, in varying degrees but undeniable

manner.

The internationalization of the company can be defined as a process of the firm's

involvement in international operations.

A number of factors have acted in the postwar period - the work of international bodies (in

particular Internationally Monetary Fund), rapid developments in transport and

telecommunications, the progress of integration processes, success of market economies,

etc., all there radically altered economic space and markets, which are no longer just local or

national but regional or global.

The globalization of economic activity influences the development of companies in two

ways:

• Addresses the challenge of foreign markets by exploiting competitive advantages;

• It can represent a threat for many companies due to the competition level when it comes

to imports or locally made goods.

The level of engagement of international companies vary considerably, from small and

medium enterprises, which limits foreign market to sell products made locally or nationally,

to big transnational companies that own secondary branches worldwide.

The opportunities of being a multinational company can be addressed either at a

quantitative level (e.g. for companies dependent on economies of scale internationalization

is a vital step) or at a qualitative level (external market approach assumes ownership of its

product performance, conditions of delivery, post services trade etc).

However, constraints are targeting several aspects, such as:

• conception of products (on the one hand companies must comply with foreign technical

rules, on the other hand they must be able to create distinct advantages compared to

existing similar products in other markets);

• international competition (this may dictate the conditions of trade);

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• existence of heterogeneity in terms of the foreign market trade policies, foreign exchange

and financial, fiscal, social, in terms of legislation, the cultural, social, etc.

Risks in international economic affairs have a specific size, complexity on conditions that

affect the economic results of the company, mainly since this commodity market instability,

and foreign currency risks capital. These require permanent appeal to cover tools and

techniques, which involve not only high costs but also specific approach strategies.

Another approach forward is that internationalization is the result of decisions they are

taking firm management in business development, the goal is exploiting market

opportunities or competitive advantages.

In deciding to enter the foreign market, the manufacturer must consider the following

elements:

a) the company's ability to export;

b) establishing and fastening the process of exporting products;

c) selecting the external markets in which the company will operate

d) the choice of the export;

a) export capacity has several components, namely: the available production capacity,

technological capability (targets a certain degree of technical equipment of the enterprise

and their own capacity for research and development), financial (the producer who wants to

enter the foreign market must be able to bear the expenditure of market research,

advertising, distribution etc.).

b) a company that intends to sell abroad has more strategic options regarding the product:

• Introduction to exporting the product sold on the international market in this case is

treated as secondary external market, the manufacturer chooses to export products that do

not require changes.

Markets where expansion takes place are selected according to their relative similarity with

the country of origin in terms of market demand characteristics, income level and structure

etc. but no less important is the potential for future market growth and the absence of

strong local competitors.

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This relative standardization of product and market characteristics selected as the company

generates the application of a uniform global marketing, with all the benefits that result.

Examples of companies that have adopted such a strategy are most American companies

that have expanded their international activities in the years 1950-1960 (Procter & Gamble,

Kellogg's, Unilever, Coca Cola etc).

This strategy based on exports generate contracts - creation of manufacturing facilities on

each company's main market.

In the early 80's the majority of these companies have begun to attach greater importance

of adapting products, greater responsibility given to subsidiaries in developing new products

and specific marketing strategies.

• The product is adapted to local market needs (differentiation strategy) -adapting is

influenced by several factors, among which: local technical norms, traditions of

consumption, cultural, climatic, customer preferences etc.

Companies that opt for this strategy will change on the one hand the physical characteristics

of the products (recipe of production, size, packaging, design, etc) on the other hand

disembodied characteristics such as brand, distribution policy, promotion etc.

Large firms opt for this strategy to achieve direct investment - their various subsidiaries

produce each host market products adapted to local marketing policy and it is adapted to

each market.

The downside of this strategy is that of some higher operational costs generated by

duplicating partial or often total value chain in each country implantation (for example, in

the early 8o 'Unilever had 17 different independent operations in the washing powder

market in Europe, duplication of production and marketing being excessive).

Another weakness of this strategy is that subsidiaries operate relatively autonomously from

the Central headquarters and the result in the medium and long term is the inability to

achieve a transfer of skills and products from one branch to another.

• Entering the foreign market with a new and inexperienced home market.

If the company draws up strategy to satisfy existing demand in several markets

simultaneously, in a uniform manner- we are dealing with standardization strategy (Global),

a property of so-called global company, and this will generate significant economies of scale

in phases: research and development, production, marketing.

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Regarding production, global strategy involves on the one hand some specialization

production establishments at product level or stage of the production process in the

geographical areas in which conditions are most favorable, on the other hand, a production

integration at a regional or global level. For example, in the early 1990s Unilever has worked

for regrouping its operations in several locations in Europe efficient cost.

Global strategy has as its starting point the theory of global consumers being identified as a

group of consumers in the developed countries having similar characteristics in terms of

income levels, the base educational, lifestyle, aspirations etc. These similarities lead to a high

rate of penetration markets certain categories of products.

A successful example of this strategy is the company that launched Gillette- new Sensor

razor with a single advertising campaign for a number of 19 countries. The results were

excellent.

• The product is designed and produced according to requirements of foreign buyers, this is

a strategy to focus on customers; It can be used for the construction of key targets, the

production of industrial goods or consumer to order to order.

c) Selection of external markets identification process is systematic, methodical. One or

more markets offer the best conditions for realization of the transaction, a process that

takes place in several distinct phases, namely:

- An overall assessment of markets in order to overcome a first phase on those who do not

qualify to be addressed by the general company this assessment is made considering the

general economic criteria, physical-geographic, political, cultural;

- Introduction to prioritize markets and analysis of criteria such as market volume for the

product, market dynamics, in terms of accessibility regulations, competition etc.

- Identifying consumer segments in the selected country or group of countries, which are

used in end demographic, socio-cultural, psychological.

When managers take into account the segmentation of foreign markets, they must take into

account two fundamental elements, namely: the extent that there are differences between

countries in the structure of market segments and on the other hand the extent that we can

identify segments that transcend national borders. The existence of the latter enhances the

ability of firms to consider global market as a single market and to pursue a global strategy.

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Both guidelines stress the need for the internationalization.

ackground In March 2001, the McDonald’s Corporation’s Indian operation was at a critical

juncture in its evolution. Over the previous few months, the company had expanded its

retail base from Mumbai (10 outlets) and Delhi (14 outlets) to Bangalore (one outlet), Pune

(one outlet), Jaipur (one outlet) and the Delhi-Agra highway (one outlet). During 2001,

McDonald’s had plans to open 15 more outlets with one each in Ludhiana and Ahmedabad

(see Exhibit 1 for a brief profile of the different cities and Exhibit 2 for a map showing their

locations in India) and the rest in cities where it already had a presence. By 2003, the

company planned to increase the number of outlets to 80 and the cumulative investment in

India to more than Rs 10 billion. (The approximate exchange rate in March 2001 was Rs

46.50 = US$1.) This would represent a threefold increase over the cumulative investment

until June 2000 (Rs 3.5 billion). Three other cities (Agra, Baroda and Chandigarh) would also

have at least one McDonald’s outlet by 2003.

Organizational StructureMcDonalds Corporation can be stated as an excellent example of a company following a

global strategy and having a centralized organizational structure. The 32,000 restaurants

situated all over around 120 countries are typically franchises, they all receive food and

packing from the same approved vendors. This reflects that there is no change in the

standard of the products all over the globe, the quality and taste is just the same

everywhere.

All of the crucial decisions taken related to the menus and marketing are made at the

higher or corporate level of the organization in America.

McDonalds has a goal of 100% total customer satisfaction and their second primary goal

is to give back to the community in which they are doing very well globally.

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Management Style at McDonaldsRestaurants of McDonalds are managed differently in the home country.

An Autocratic Management Style is mainly practiced in McDonalds. One of the main

reasons behind following an autocratic management style is that they deal directly with

their customers and at busy times a decision needs to be made quickly and correctly to

ensure that the customer receives the best services.

Another reason for using autocratic management style is that the people who are better

trained for certain tasks will be needed to do them at busier times.

Every business has got different cultures and the cultures that are present in the

business depend on the management styles and organizational structures that are used,

so it's even the same how it works for McDonalds.

McDonalds have different cultures present within the business; this is because of its size

and the number of offices that are situated all over the globe. In the home country

McDonalds offices follows Task Culture, in which all people are encouraged to work as a

team. All of the offices in the home country are divided into different functional

departments. These departments have people specially trained to do specific task, as all

staff members are trained to do a certain job. The management of the departments leave

them to carry on with their jobs alone.

McDONALDS INDIA

Brief of McDonalds IndiaMcDonalds in India is joint venture between the McDonalds Corporation of America and

two businessmen from India named Mr. Amit Jatia and Mr. Vikram Bakshi.

It's a totally locally managed company run by Indians even the employees and suppliers

are Indians.

The 1st McDonalds restaurant opened in the year 1996 for serving its customers.

In India McDonalds have got over 160 restaurants covering the main cities of the north,

south, west and east region.

McDonalds India has got its key objective of 100% customer satisfaction and the formula

behind achieving this goal in the Indian restaurants operations is the long standing

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commitment to the McDonalds Promise, which promises to provide four things to their

customers at any cost and all the time, they are as follows;

Quality

Service

Cleanliness and

Value

McDonalds India is amongst the few countries that provides a home delivery service for

its customers. There is no restriction on the minimum order for home delivery, but Rs.15

is charged for it as delivery charges.

Culture of McDonalds in IndiaThe respect McDonalds have for the Indian customs and culture reflects in all the

operations of the business. They are well known globally for the respect they give to the

local culture where they operate their business.

McDonalds have developed a menu especially for India with a line of vegetarian items to

match the local tastes and culture.

Operating globally, India is the 1st country where McDonalds do not sell any kind of beef

or pork items as its not accepted in India because of its culture and customs. Different

sections have been provided to deal with vegetarian and non-vegetarian items till its

served to the customers. Even the milk-shakes and the soft-serves are made egg-less

and only vegetable oil is used for the entire cooking process.

Restaurants and Locations- IndiaMcDonalds restaurants are situated all over the main cities of India to serve its

customers. The main cities that have McDonalds restaurants in India are as follows;

Delhi, Uttar Pradesh, Haryana, Punjab, Uttaranchal, West Bengal, Himachal Pradesh,

Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Madhya Pradesh.

A map with all the cities having McDonalds restaurants have been

presented below and the cities have been star marked for better

understanding.

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Indian Menu Emphasizing on The local

CultureNON-VEG

ITEMS

VEG

ITEMS

BEVERAGES

DESERTS

OTHER PRODUCTS

Chicken Maharaja Mac

Mc Veggie

Cold Coffee

Soft Serve Cone

Happy Meals

Mc Chicken

Mc Aloo Tikki

Ice Tea

Mc Swirl

French Fries

Filet-O-Fish

Paneer Salsa Wrap

Soft Drinks

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Soft Serve

Chicken Mexican Wrap

Crispy Chinese

Mc Shakes

Flavor Burst

Chicken Mc Grill

Veg Mc Curry Pan

Hot Serves

Floats

Chicken Mc Curry Pan

Pizza Mc Puff

Chicken Nuggets

Veg Nuggets

The above mentioned table contains the list of items that McDonalds offers to its

customers in India. Beef and pork items are not offered in India as it's against the culture

of the Indian people to consume such things.


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Corporate Culture McDonalds India-

Hierarchy StructureMcDonalds work culture is highly dependant on the particular line manager in charge at

any given point of time.

Its quite normal to think that the line manager would almost all the time use his position

power and would use a telling style of leadership since the typical employee is young or

inexperienced.

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Its true that some managers were observed as running the operations in a machine like

manner especially during peak business hours, but in the maximum of the cases the

managers were found to be relaxed and sometimes indistinguishable from the other

employees.

A same kind of hierarchical structure is followed globally in all the McDonalds

restaurants, as they believe in maintaining their on set standards without any fail and

thus being successful all the time.

The chart presented previously under the McDonalds restaurant level management

structure is applicable for India as well.


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CROSS CULTURAL AWARENESS

Necessity:-its very important as it helps a Multinational Corporation to identify where and how things

may be going wrong,

So cross cultural training is very vital part of the process as it helps the multinational

corporation to identify areas that needs some serious attentions or else the things might

goes miserably wrong.

Cultural differences can happen in many ways in a multi national corporations like

McDonalds.

Differences can be mainly in areas like;

Communication

Attitude

Approach of completing a given task

Decision making styles etc.

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So its very important to realize the above mentioned differences with the help of cross

cultural awareness or else problems may arise and become more complicated in the

future.

Effective ways to Increase cross cultural

awareness for a Multinational corporation

like McDonalds;Building Cultural Knowledge - It refers to learning about other cultures and countries, with

the help of internet, books etc.

Treating people as individuals - Information on the other cultures available are usually

based on a general basis, which means the information is not applicable for every single

member of that culture.

Implementation of Own Cultural Knowledge - Finding some new information about a

culture which is useful should be worked on to experience the benefits and learn more.

Maximum Avoid of Assumptions - Jumping into conclusions about people is wrong as its

one of the most important steps to increase cross cultural awareness.

POTENTIAL PROBLEMS IN RESPECT

OF CULTURES AND INTERCULTURAL

INTERACTIONSMcDonalds being a multinational corporation is likely to face a number of challenges

while operating globally.

Some of the potential problems that McDonalds is likely to face operating globally are as

follows;

"Communication"

Different language

Different communicating approach

Style - pitch, tone, accent, gestures, signs, expressions etc.

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"Culture"

Private,

Public or

Mixed

- It refers to the openness of people, their ability and extent of accepting another culture.

"Monetary Conflicts and Exchange Rates"

Different exchange rates and the acceptance of currencies of other countries

Exchange Rates not favorable for the home country to commence business.

"Local Employment Laws"

Every country has got set of different employment laws

Difficulty for the home country to follow such norms while marketing and commencing its

business worldwide.

"Technology"

High cost of technology up-gradation and new set-up

"Political"

Government interference

Rules and regulations set up by the government

As the culture differs from one country to another the company is likely to face such

cultural challenges while operating globally.

Porters 5 Forces Model in Case of

McDonaldsThe 5 Forces Model presented by Porter deals with the key factors functioning outside

the industry that affects the characteristics of competition within it, in such a case the

forces inside the industry that affects the system in which firms compete.

Thus the profitability of the related industry is conducted in the Porters 5 forces model.

Porter states in his model that the 5 forces which drive competition are as follows;

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Competition between existing sellers: - The industry in which McDonalds is categorized is

highly a competitive one, as it comprises of a number of fast food companies who can

come up with new ideas over the night and take up with the business of their competitors.

Therefore McDonalds have done a great job over the years since 1940 by bringing in

new products, expansion of their business and remarkably going well with their

customer's choice and preference to stay strong and do well in the industry working

globally over 120 countries and having more than 32,000 restaurants worldwide.

Entry of new players in the market: - To enter into an industry where there are big names

like McDonalds, Burger King Etc, and which involves a high cost of research and

developments, it becomes quite difficult for new companies to enter such an industry.

Therefore McDonalds is enjoying the benefits of such conditions as it's a brand which is

there in the industry over 70 plus years of successful business and expansion. Once

again making it quite difficult for the new companies to enter and become successful in

the industry.

Substitutes: - There are a number of substitutes in the industry, by which McDonalds

burgers can be substituted, as well as its beverages and other products which they offer

to their customers.

Strength of suppliers: - The power in the hand of the suppliers in the fast food industry

would be not much until and unless the components of the offered products are not

readily available in the market.

Strength of buyers: - The power in the hands of the buyers is not much high in this

industry as the customers needs to consume what the brand offers.

Porter stated that the level of competition is determined on the basis of the relative

strengths of the above mentioned 5 forces.

In case of McDonalds the Porters 5 forces model is perfectly applicable as it satisfies all

of the 5 factors mentioned in the model.

Effectively Solving Problems of

Intercultural Interaction and WorkingIntercultural interaction and working is one of the most important part of a business

specially for a multinational corporation like McDonalds for which extra care should be

taken in order to solve and avoid problems effectively related to it.

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The few most effective steps that can be taken in order to effectively solve problems of

intercultural interactions and working are as follows;

Intercultural Communication Workshop: -

Giving respect to others and their cultures

Being patient and not getting frustrated easily

Asking questions to clear doubts and avoid misunderstandings

Knowing the difference between humor and insult

One persons humor can be the other persons insult

Being positive and avoiding mistakes to happen again

Self improvement in respect to own communication and motivation style to be accepted

by others

Intercultural Training of Culture Assimilator: -

This method is also known as a cognitive technique as it emphasizes on the gaining of

knowledge and information by the trainee. The components in this technique help in the

effective development of attitude, emotions, behaviors and skills of the trainee.

This technique helps in developing the trainees by giving them exposure to the wide

range of situations in respect of a specific culture.

The method of Culture Assimilator, Intercultural Training Process helps the trainee in the

following mentioned ways;

Ability to understand and solve intercultural issues

Helps in reduction of ethnocentrism

Helps in effective interaction with people belonging to different cultures

Helps in increasing the stress tolerance capability

Helps in improving knowledge and information about different cultures

Helps in working better on international assignments in an effective and haste free

manner

Helps in experiencing expected intercultural interactions

Therefore McDonalds being a multinational corporation operating its business globally its

advisable for McDonalds to practice similar training and development programs for their

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employees in order to solve and avoid all kind of problems related to intercultural

interactions and working.

CONCLUSIONMcDonalds being a multinational corporation operates its business globally serving its

products in more than 120 countries through its restaurants.

McDonalds have got more than 32,000 outlets which are situated all over the globe.

McDonalds provides a magnificent line of products in which they offer different items for

different countries on the basis of the local culture.

This reflects that McDonalds gives high respect and importance to the culture of its

customers, which finally helps in a global acceptance of its products.

McDonalds products are very reasonable for a common man and of good quality, making

it a very preferred fast food brand globally.

Different effective steps have been taken by the corporation to solve all its problems, for

their product development and its business growth.

McDonalds believes in quality products for its customers without and compromise.

All of the above mentioned factors speaks for itself the few main reasons responsible for

its continued business growth and global acceptance.


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when coming up with the fast food restaurant, McDonald's is one of the biggest restaurant

chains in the world. McDonald's would adapt local food materials to create new products, like

rice burger in Taiwan and McLobster burger in in some Canadian franchises. Although not

every product which McDonald’s did adaptations were successful, McDonald's try their best

to combine the product with the local culture and make more profit. Besides adjusting the

product, McDonald's might adapts their promotion strategies in different countries.

“Yet, as McDonald's has been discovering, running a successful global company

requires some pretty significant changes in corporate behavior. International businesses

require striking a balance between managing a brand on a consistent worldwide basis and

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appealing to differing consumer tastes in dozens of markets. Consumer companies have long

understood the importance of tailoring products to local tastes” (Gumbel, 2008, p.88).

When international companies enter other countries’ market, they need to investigate

local people life style. Not only considering economic and political, but also culture take an

important role. Moreover, Barron & Hollingshead (2004, pp) mentioned that “international

companies attempt to analyze their brand from a global perspective without first analyzing

their consumers from a global perspective”.

Research Questions

What are the effective ways that McDonald’s use to adapt their product in different culture?

How McDonald’s make balance between marketing strategies and culture?

Besides adapting the products what are some other ways that make McDonald’s to be

successful?

Nowadays, many different culture are melting together to become one global culture.

However, there are some differences between each culture. Therefore, when companies are

promoting their products they should adjust to different market instead of provide only one

standardized product. Because of international expansion, when the companies are going to

expand abroad they should think about whether to adapt their product or standardize the

product.

After McDonald’s opened too many restaurants and could not make any more profit in United

State, they start to expand their market overseas. The first overseas’ restaurant was open in

Canada in 1967. By the end of 1983, McDonald’s had already opened 7,778 restaurants over

32countries. In Asian, McDonald entered the market of Singapore, Hong Kong, Japan in

the1970’s. In 1984, McDonald got into Taiwan’s fast food market.(See Table 1)

McDonald’s products are new things for the local customers. McDonald’s food

custom, taste, price, and size are all different from the food served in their own

country’s restaurant. As the result, McDonald’s needed to adjust their product to

attract customers. For instance, if local like to eat spicy food, McDonald would make

spicy burger. Also, the atmosphere is another factor that will affect customers.

McDonald’s designs its restaurant looking like a bar in Germany. This design only

attracts young people rather than families. The design may look native like to German

but it lost the original image of McDonald’s (Haarbach, 2008, (pp.8-9)). Haarbach’s

research points out that after six year operation, McDonald’s did not make any profit

in German market.

b. Recent Development

As the table above shows, at the economic crisis in 2008, McDonald’s shut

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down a number of restaurants in the United States. However, the numbers of the

restaurants outside the US have increase. In spite of McDonald’s some restaurants

were closed, the total numbers of it restaurants was still increase. (See Table 2)

3.6 Adaptations in Different Countries

McDonald's expand their business from the US to every country in the world

successfully. It really does lots of new creation in the fast food industry and also keeps the

leading role with their promotions. No one can always be successful; however, McDonald's

learn from its the failed cases.

3.7 Successes Examples

In Taiwan, When MacDonald entering Asia markets, it released rice hamburger

which is the main dish for Asians. That was successfully accepted by Asia people.

“McDonald's is in the rare and enviable position of possessing a truly global

service brand, a name known to hundreds of millions around the world.” (Serwer &

Wyatt, 1994(pp.103).

In this article it highlights the menu that have adapted in other countries. The

reason that McDonald changes their menu is because they want to make profit and

meet the need of the local market.

Also, McDonald’s have some examples of regionalized version products for

local people.

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3.8 Failed Examples

Some of McDonald's failed products, are described below:

1. McDonald's was releasing "Pasta Zoo" in Australia and New Zealand. The product did not sell well. In

the end, it was removed from the menus. (See picture 7)

2. The new product "McLobster" was on the menu in parts of Canada and New England in the US. It was

failed; the reason was the price was too expensive. Therefore, this product is only still available in some

Canadian franchises and occasionally in Maine.

3. The other failed product was "McAfrika burger" which was releasing in Africa. This burger was

advertised when Africa experiencing a huge famine in 2002.(See picture 8)

Conclusion

This study has concluded two points about McDonald’s marketing strategies. First one is that

McDonald’s wants to expand their market successfully in other countries, McDonald’s has to investigate

the country’s food habit and tries to adapt their products to make local people can accept it. For example,

McDonald’s make adaptations in India. Because of their religion rules, McDonald’s used local food

materials to replace all beef products, and even release the vegetarian meals which does not release in

other countries. Also, in Islam countries, McDonald’s avoid selling pork products. Besides making

adaptations for the religion and culture, McDonald’s create new products to ingratiate local people’s food

habit. Such as McDonald’s release rice burger in Taiwan.

The second one is that McDonald’s expansion is influenced by each country’s policy, economic,

people’s value and attitude. Therefore, when McDonald’s going to expand their market to other country,

they have to concern many different factors to make sure it is worthy to invest the overseas market. The

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results this paper showed in the previous part indicate that McDonald’s adaptations are truly helpful for

their expanding.

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managing across culture

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