SIM337 Contemporary developments in business management

SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 Student ID: 149078874/1 Student Name: Nguyen Thi Kieu Anh Module Code: SIM 337 Module Name / Title: Contemporary Developments in Business Management Centre / College: Banking Academy of Viet Nam Due Date: 16 Jan 2015 Hand in Date: 16 Jan 2015 Assignment Title: Individual assignment Students Signature: (you must sign this declaring that it is all your own work and all sources of information have been referenced) SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 Contemporary Developments in Business Management SIM337 Prepared by: Nguyen Thi Kieu Anh Student ID: 149078874/1 Submission Date: 16th January 2015 Number of Words: 3,970 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 TABLE OF CONTENTS CONTENTS Introduction Task - A brief overview of primary external factors 2.1 PEST analysis 2.1.1 Political factors 2.1.2 Economic factors 2.1.3 Socio-cultural factors 2.1.4 Technological factors 2.2 Competitors analysis Task - The changing competitive environment 10 3.1 Analysis of the changing competitive environment in McDonald’s China 10 3.1.1 Rivalry among existing firms 10 3.1.2 Threat of new entrants .11 3.1.3 Threat of substitutes 12 3.1.4 Bargaining power of buyers 12 3.1.5 Bargaining power of suppliers 12 3.2 McDonald’s China response to changing the competitive environment 13 3.2.1 Product .13 3.2.2 Services 13 3.2.3 Distribution .14 3.2.4 Price 14 3.2.5 Promotion 14 3.2.6 People .15 3.2.7 Process .15 3.2.8 Physical evidence .15 3.3 Critical evaluation of the effectiveness of McDonalds’ response 15 3.4 Areas for improvement in the response of McDonald’s 17 Conclusion 19 LIST OF REFERENCES 20 APPENDICES 24 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 EXECUTIVE SUMMARY Nowadays, external environmental analysis plays an important role in the development of most companies It facilitates in obtaining information outside of the company that help the company determine suitable business strategies Furthermore, the changing competitive environment is considered as a big challenge for most companies It requires the company adjust to constantly adapt to changes in competitive environment As a leading global foodservice company McDonald’s needs to pay more attention to these aspects This report is divided into two parts The first part would identify and assess primary external influences that the company is subject to External environment would be identified within the scope of PEST analysis and competitor analysis The second part would show how the changing competitive environment influences policies and decisionmaking of McDonald’s and evaluate efficiency of the company’s response It is presented by Porter Five Forces model Finally, some areas for improvements in the response of competitive environment changes would be proposed SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 CONTENTS Introduction McDonald’s is the top fast-food company, serving nearly 70 million customers daily in more than 119 countries with over 35,000 restaurants (Mcdonalds, 2014a) Its business is divided into four main geographic segments that is United States, Europe, Asia/Pacific, Middle East and Africa (APMEA) and other countries China, Australia, Japan are three largest segments in APMEA, which accounted for 54% of revenues that McDonald’s collected from APMEA segment (McDonalds, 2013, p.10) This report will focus on McDonald’s China which is the third largest market for McDonald’s after the US and Japan It entered China in 1990 and currently McDonald’s has expanded and developed with more than with 2,000 restaurants and over 80,000 employees [ CITATION Ang14 \l 1033 ] Task - A brief overview of primary external factors 2.1 PEST analysis McDonald’s operate on both domestic and international market Whether in domestic or international market, it must face with changes in business environment which can create opportunities but also cause threats for the company PEST is a useful tool for understanding better what is going on outside their organization, identify opportunities and threats, and manage risk based on analyzing political (political stability, trade regulations ), economic (economic growth, exchange rate ), socio-cultural (differences regarding demographic and cultural aspects) and technological factors (technology advances) (Fee, 2013, p.56) 2.1.1 Political factors China is a unitary state, where the Chinese Communist Party (CCP) holds all political power (Stojic, 2010, p.27) A one-party state may provide a SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 stable political environment that motivates McDonald’s to expand business in China Nevertheless, in order to start a business in the Chinese market, entrepreneurs need to pass the long and complicated procedures to register the new company Countr Procedur Time y es (days) China Australi (number) 14 38 23 a Japan Table 1: Starting a business data for China compared to Australia and Japan (Doing Business, 2012a, p.88) From the table above, China is obviously a bureaucracy state with burdensome entry regulations because it needs 14 procedures and 38 days to register the business Compared to other two countries in APMEA segment are Australia and Japan, they need less procedure and time to complete the business registration process According to World Bank (2012), China ranks at 151st place out of 183 economies in the terms of starting a business This process of China is extremely time-consuming and slow down business expansion of McDonald’s McDonald’s entered the Chinese market since the early 1990s under the form of a wholly-foreign owned enterprise (WFOE) or joint venture (JV), not follow franchise model as at that time the Chinese government restrictions on foreign investment and the lack of Franchise Law Just in 2004, China permitted foreign investment in franchising since its entry into the World Trade Organization (WTO) China government also revised the laws on foreign direct investment (FDI) and the intellectual property laws including the Trademark Law, the Patent Law and the Copyright Law (Stephens, 2009, p.1) It creates opportunities for McDonald’s to develop and replicate franchise model for expanding to news locations rapidly while SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 minimizing risks as well as to run the business more freely and confidently in the Chinese market 2.1.2 Economic factors China is the fastest growing economy in the world Chinese economy has proved its strength in the period of financial crisis 2007-08 At that time, when other powerful economies such as U.S and Europe were struggling, China responded quickly, not only overcome global economic downturn but also GDP grew 8.7% in 2009, 10.3% in 2010, and 9.2% in 2011 (Doing business, 2012b, p.1) Besides, China have been undergoing massive urbanization China’s current urbanization rate stands at around 47%, but its national development agenda has mandated 60% urbanization in 2030 (Bharne, 2013, p.226) These things have lead to a rise in income of Chinese As Shi (2012, p.1) showed, by the end of 2012, the GDP per capita reached about $5500, making China one of the upper-middle income countries which in turn rapidly growing in middle class and increasing in the number of affluence people in China Such things increases demand and purchasing power in fast-food industry which in turn promotes the development of McDonald’s in China However, there is urban-rural income disparity in China In 2009, the gap was 3.33 times, the highest figure so far (Aglietta and Bai, 2013, p.210) Figure 1: Urban-rural income gap in China, 1978-2012 (Shi, 2012, p.6) McDonald’s, therefore, have responded to uneven wealth distribution by applying tiered pricing model SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 2.1.3 Socio-cultural factors Chinese food culture is different from that in the West Eating habits and preferences are typical examples As for eating habits, Chinese people tends to go to a restaurant in occasions to meet friends, even in fast-food restaurant rather than inviting them to their own house whereas towards most Americans, fast-food restaurant is chosen for its quick food service and convenient access Thus, McDonald’s are located in main streets or highways in the US but for China, most of restaurants are built in downtown where population is crowded (Zhou and Zhang, 2012, p.15) When McDonald’s penetrated the Chinese market, it promoted Americanstyled beef hamburger to conquer Chinese However, Chinese people prefer chicken meat than beef meat At that time McDonald’s changed its strategy by launching chicken burger to suit Chinese people’s tastes (Han, 2008, p.73) Hence McDonald’s need further efforts in localizing its menus to suit Chinese tastes Country Culture dimensions Individualism Power distance Uncertainty avoidance Masculinity China USA 20 80 30 66 91 40 46 62 Table 2: Cultural differences between the USA and China (The Hofstede Centre, 2014) As can be seen from the table above, the individualism of Chinese is really in low position, but it is high in American culture That means Chinese people usually have the habit of following other people’s behaviours, the old generation tends to stick to old tradition and not easy to accept new things (Cui and Ting, 2009, p.43) However the young generation are different, they can easily accept new things imported from western countries, even they are fond of experiencing foreign brands’ products/services Besides, China had the youngest population with the number of people aged below 30 at 497 million people (Euromonitor International, 2012) Thus, McDonald’s has targeted at children, young parents and young people to boost sales SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 As many other countries, the busy life have made Chinese people choose fast food as best solution to save time However, rapid growth of fast-food industry causes numerous diseases for Chinese people such as heart disease, overweight, obesity, and even cancer A study by the University of Washington’s Institute for Health Metrics and Evaluation (IHME) found that China is now the second most obese country in the world behind the US, with 46 million Chinese adults are obese with a further 300 million overweight [ CITATION Lio11 \l 1033 ] Along with increased disposable income, Chinese people are aware of health issues and highly concerns about the healthy eating and safety of the food It has pressured McDonald’s to offer healthier options like low-calorie, low-carbohydrates and adding more fruits and vegetables into its servings In addition, McDonald’s also has to ensure that all products providing to customers are totally fresh and hygienic 2.1.4 Technological factors The Chinese government has many policies to encourage development of science and technology For example, they support funds to research and adopt new technology in numerous fields, including agriculture, medicine and genetics (Stojic, 2010, p.31) Employing advanced technology can create opportunities for an improved supply chain which brings benefit in providing raw materials for McDonald’s According to Jeffrey Schwartz, the chief executive officer of McDonald’s China, 95% of materials used by McDonald’s in China were locally sourced (China Retail Research Center, 2008) Hence, McDonald’s can reduce costs in importing raw material which in turn reduce products prices to attract customers China not only has the world’s largest internet users but also surpassed US to become the world’s largest market for smart phones As of June 2014, China has had 632 million internet users, up to 14.42 million from 2013 and 527 million mobile internet users, an increase of 26.99 million compared with the end of 2013, according to The China Internet Network Information Center (CNNIC) [ CITATION Ada14 \l 1033 ] Rapidly growing usage of internet and mobile in China has created favourable conditions SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 for McDonald’s to advertise products in economic and fast way as well as easily develop e-business like online food ordering service 2.2 Competitors analysis When McDonald’s penetrated the Chinese market in 1990, McDonald’s had to compete with strong competitors - Yum! Brands (with pillars: KFC1987 and Pizza Hut-1990) As Chinadaily (2008) stated, KFC’s booming sales, on the one hand provided a big incentive for McDonald’s to enter the Chinese market in October 1990, on the other hand that made McDonald’s choose Shenzhen, a major southern city where there was no KFC at the time, to open its first 500-seat store on Jeifang Road Since then there are many other competitors emerged like Disco (1994), Ajisen Ramen (1995), Subway (1995), East Dawning & Little Sheep Hot Pot pillar of Yum!Brand (2005), Burger King (2005), Japan’s Mos Burger (2008) and many other local chains With increasing rapidly in the number of competitors as well as its development, it is not easy for McDonald’s to be leading in China’ market In order to achieve this target, it requires McDonald’s put more energy and effort in building business strategy and creating competitive advantages in Chinese market Task - The changing competitive environment 3.1 Analysis of the changing competitive environment in McDonald’s China Figure 2: The Five Forces Driving Competition (Porter, 1980, p.4) 10 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 Chinese Olympics” would resonate very, very strongly with all Chinese consumer [ CITATION Chi082 \l 1033 ] Sale promotion: In 2007, McDonald’s China partnered with Taobao.com a popular Chinese online shopping site Consumers who buy any type of McDonald’s super value package food from any of McDonald’s over 800 outlets can get a “RMB20 cash coupon” from Taobao.com [ CITATION Chi07 \l 1033 ] Accordingly, customers can both enjoy McDonald’s food and accumulate cash for the exchange of items such as MP3 player, mobile phone at Taobao 3.2.6 People McDonald’s established 7th global Hamburger University of Shanghai with the purpose of training and developing employees’ skills to meet job requirements All leaders in the field have now been 100% localized [ CITATION Sph15 \l 1033 ] 3.2.7 Process McDonald’s has invested more into infrastructure especially IT, thereby the distribution, logistics and cold chain infrastructure in supply chain and all restaurant operation systems from sale registers to inventory and scheduling automation are improved to made the business more productive [ CITATION Sph15 \l 1033 ] 3.2.8 Physical evidence Localization: McDonald’s re-design the counter, chairs and desks to suit the height and body shape of Chinese people (Han, 2008, p.73) In addition, McDonald’s modified the restaurants’ design symbolizing Chinese culture in occasions of traditional festivals to show respect for Chinese traditions and culture For instance, during the 2004 Spring Festival, McDonald’s on Beijing’s Wangfujing Street attracted many people with traditional Chinese look, decorating their interiors with paper cut-outs of Chinese character Fu (Happiness), magpies and twin fishes, all auspicious symbols [ CITATION Chi04 \l 1033 ] 16 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 3.3 Critical evaluation of the effectiveness of McDonalds’ response The best thing McDonald’s have been doing in China is to enhance its local responsiveness to switch from global firm to a transnational firm Figure 3: Multinational Strategies and Structure: The integration-Responsive Framework (Peng, 2006, p.298) As a transnational firm, McDonald’s has localized its menu to adapt to local tastes and changed its interior design in traditional festivals to express its respect to Chinese culture…By doing this, McDonald’s is likely to set up for long-term success in the Chinese market However, McDonald’s introduces Chinese dishes on its menus in a slow manner, which is different from KFC While McDonald’s has still remained a standard of 20% local items and 80% national items in their menus, KFC had changed almost 80% of its menu (McMichael, 2013, p.10) As Mellor (2011) showed, the secret to the success of KFC derived from to its use of local ingredients - both in its management team and on its menus In the 24 years (1987-2011) it has been operating in China, KFC has hired Chinese manager to build partnerships with local companies in its expansion drive and used their expertise to offer an array of regional dishes that appeal to domestic tastes Besides, it is obvious that McDonald’s not take the initiative in response to the changing competitive environment, and always one step slower than KFC That is also reasons why KFC has achieved more successful than McDonald’s in the Chinese market Conversely, McDonald’s has fully taken the advantages of drive-thru service to create competitive advantages 17 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 18 compared to its rivals After achieving strong sale growth and seeing strong demand at the first, McDonald’s speeds up its plan to open drivethru in China [ CITATION Joe07 \l 1033 ] Now half of the new stores McDonald’s opens in China are equipped for drive-thru operations and have brought lots of profit for the company (Pride and Ferrell, 2010, p.277) In 2004, McDonalds had only 600 outlets and achieved sales of RMB3.55 billion (US$429 million) (French and Crabbe, 2010, p.110) After years (2009-2013) since McDonald’s increased the number of outlets up to 2,000 outlets and the serving time up to 24 hours per day, McDonald’s revenue has doubled to over US$2.5 billion and profit has grown by close to 90% [ CITATION Sph15 \l 1033 ] However, rapid development of fastfood industry in general and that of McDonald’s in particular causes numerous diseases of Chinese people which in turn poses a threat to fastfood companies and McDonald’s is certainly no exception In this situation, healthier menu of McDonald’s is considered as an effective way to change conception of customers about fast food thereby attracting customers Another factor that contributes to McDonald’s success is focusing on improvement of infrastructure in supply chain Through this decision, McDonald’s can reduce product prices owing to 95% of materials were locally sourced Besides, applying tiered pricing model and different types of value meals packages help McDonald’s reach the working-class segment to expand the number of customers Furthermore, sale promotion via taobao.com, training employees to support for public relations are also considered as the amazing strategies of McDonald’s However, as a sponsor of Bejing Olympics (2008), although receiving praise from the Chinese people, the slogan “I’m lovin’ it when China wins” for its Olympic marketing campaigns triggered criticism from Americans because McDonald’s openly supports the Chinese by turning their back on the United States This can pose a threat for McDonald’s if Americans voice their displeasure by boycotting McDonald’s [ CITATION spo08 \l 1033 ] SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 After 24 years since McDonald’s entered the Chinese market, by giving out strategies and adjust it constantly in response to new competitive environment, McDonald’s has achieved certain successes as well as learned about limited areas that need to be more improved in the next years 3.4 Areas for improvement in the response of McDonald’s  Product Food safety and health issues are matters that Chinese people concerned first nowadays McDonald’s, therefore, needs to continue creating trust in customers by ensuring fresh materials and supplement more the amount of vegetables into its servings and serves with fruit juice besides soft drinks to reflect their consideration of Chinese people’s health Chinese people prefer to eat dishes made from chicken In order to increase competitiveness, McDonald’s needs to enrich its menu by processing different chicken dishes In addition, McDonald’s should actively add more traditional dishes to attract more customers McDonalds needs to invest more on R&D department to research and improve products quality in ways that are beneficial to customers’ health  Services Besides Shanghai, McDonald’s should continue developing and expanding delivery systems in other areas as well as improving staff quality, delivery process to ensure on-time delivery  Distribution Fast food brands are racing to expand the distribution system, McDonald’s need to have more positive measures for its distribution system to continue attracting and retaining customers, especially teenagers McDonald’s continues expanding franchise system, mainly located in cities having high urbanization rate and manage strictly its distribution channels from the selection of the personnel, facilities to ensure the consistency of quality in stores across the country 19 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1  Prices The present product price of McDonald’s China is affordable for different income levels However, McDonald’s need to launch more different types of value meals packages with the different kinds of products to attract and reach wider range of customers  Promotion McDonald’s should enhance promotional or discount programme to attract customers: membership card, scratch card program, and gift certificate Employees have a professional and effective working style: serve quickly, and always be affable and enthusiastic with customers McDonald’s can continue promoting and supporting for sport programs but they should set up appropriate marketing campaigns to avoid unwanted criticism  Physical evidence In the stores, McDonald’s should create different spaces to suit each segment: animated space is suitable for young generation, quiet or private space is an ideal place for the officer and elderly Conclusion This report shows clearly the important role of analysis of external environment and the changing competitive environment when an enterprise penetrate a new market Obviously, identifying its strengths and weaknesses as well as the opportunities and threats will create chances for McDonald’s to make advances over the competitors Based on the detailed analysis above, it can be concluded that company strategies are the determinant element whether company can achieve their goals or not Flexible marketing strategy is a key to the success of McDonald’s in China From the policies regarding product, prices, distribution and sale promotion, McDonald’s have shown strong business orientation of company is “think global, act local” Although the presence of weaknesses in policies which causes company face many challenges and difficulties in recent years, but its position in fast food industry is undeniable 20 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 LIST OF REFERENCES Aglietta, M and Bai, G (2013) China's Development: Capitalism and Empire Abingdon: Oxon: Routledge Agriculture and Agri-Food Canada (2014) Foodservice Profile-China Available at: http://www5.agr.gc.ca/resources/prod/InternetInternet/MISB-DGSIM/ATS-SEA/PDF/6566-eng.pdf (Accessed: 29 December 2014) Bharne, V (2013) The Emerging Asian City London: Routledge Chinadaily (2004) KFC and McDonald's — a model of blended culture Available at: http://www.chinadaily.com.cn/english/doc/200406/01/content_335488.htm (Accessed: 02 January 2015) Chinadaily (2008) Competition gearing up in China's fast food industry Available at: http://www.chinadaily.com.cn/bizchina/200806/30/content_6806904.htm (Accessed: 28 December 2014) ChinaRetailNews (2007) McDonald's Goes Online At Taobao.com Available at: http://www.chinaretailnews.com/2007/09/11/830mcdonalds-goes-online-at-taobaocom/ (Accessed: 03 January 2015) China Retail Research Center (2008) McDonald's to Speed up Investment in China Available at: http://crrc.sem.tsinghua.edu.cn/dnews/252866.jhtml (Accessed: 22 December 2014) Cui, Y and Ting, Z (2009) American Fast Food in Chinese Market: A Cross-Cultural Perspective Master’s Dissertation in International Marketing Halmstad University 21 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 Doing Business (2012a) Doing Business 2012: Doing Business in a More Transparent World Washington DC: The World Bank 10 Doing Business (2012b) Doing business in China Washington DC: The World Bank 11 Doland, A (2014) McDonald's Tries a Local Touch With Chinese Store Decor Available at: http://adage.com/article/globalnews/mcdonald-s-a-local-touch-chinese-store-decor/292702/ (Accessed: 17 December 2014) 12 Entrepreneur (2014) McDonald's Available at: http://www.entrepreneur.com/franchises/mcdonalds/282570-0.html (Accessed: 19 December 2014) 13 Euromonitor International (2012) Special Report: The World’s Youngest Populations Available at: http://blog.euromonitor.com/2012/02/special-report-the-worldsyoungest-populations-.html (Accessed: 21 December 2014) 14 Fee, K (2013) Contemporary Developments in Business and Management United Kingdom: University of Sunderland 15 French, P and Crabbe, M (2010) Fat China: How Expanding Waistlines are Changing a Nation 1st edn United Kingdom: Anthem Press 16 Han, J (2008) 'The Business Strategy of Mcdonald’s', International Journal of Business and Management, 3(11), pp.72-74 17 Hitt, M A, Ireland, R D and Hoskisson, R E (2008) Strategic Management: Concepts and Cases: Competitiveness and Globalization 10th edn Mason, OH: South-Western Cengage Learning 18 Huang, W (2012) McDonald's China CEO on bringing McMuffins to the masses Available at: http://fortune.com/2012/05/10/mcdonaldschina-ceo-on-bringing-mcmuffins-to-the-masses/ (Accessed: 03 January 2015) 19 Jie, L (2008) McDonald's growing in China Available at: http://www.chinadaily.com.cn/business/200809/08/content_7007412.htm (Accessed: 17 December 2014) 20 Ko, S and Woo, C H L (2008) McDonald's: Is China Lovin' It? Univeristy of Hong Kong 22 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 21 Lavendarli (2013) KFC in Shanghai Available at: http://www.studymode.com/essays/Kfc-In-Shanghai-1120046.html (Accessed: 01 January 2014) 22 MarketLine (2014) Company Profile: McDonald's Corporation 23 McDonald, J (2007) McDonald's Opens Drive-Thru in Beijing Available at: http://www.washingtonpost.com/wpdyn/content/article/2007/01/18/AR2007011802289.html (Accessed: 05 January 2015) 24 McDonald's (2013) Annual Report 2013 Available at: http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investo rs/McDs2013AnnualReport.pdf (Accessed: 17 December 2014) 25 Mcdonalds (2014) Company Profile Available at: http://www.aboutmcdonalds.com/mcd/investors/company_profile.html (Accessed: 16 December 2014) 26 McDonalds (2015) McDonald's History Available at: http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds_history _timeline.html? DCSext.destination=http://www.aboutmcdonalds.com/mcd/our_compan y/mcd_history.html (Accessed: 02 January 2014) 27 McMichael, B (2013) 'To Be, or Not to Be More Adaptive to a Local Environment', Journal for Global Business and Community Consortium for Undergraduate International Business Education, 4(2), p.13 28 Mellor, W (2011) McDonald’s No Match for KFC in China as Colonel Rules Fast Food Available at: http://www.bloomberg.com/news/201101-26/mcdonald-s-no-match-for-kfc-in-china-where-colonel-sandersrules-fast-food.html (Accessed: 05 January 2015) 29 Peng, M.W (2006) Global Strategy 3rd edn Mason, OH: SouthWestern Cengage Learning 30 Peter, S.G (2004) Fast Food Takes a Bite Out of Chinese Culture Available at: http://www.washingtonpost.com/wp-dyn/articles/A258682004Dec25.html (Accessed: 18 December 2014) 31 Porter, M.E (1980) Competitive Strategy: Techniques for Analyzing Industries and Competitors United States of America: The Free Press 32 Porter, M.E (2008) On Competition-A Harvard Business Review Book United States of America: Harvard Business School Publishing Corporation 23 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 33 Pride, W M and Ferrell, O C (2010) Marketing Mason OH: SouthWestern Cengage Learning 34 Reuters (2008) McDonald's tries home delivery to push China sales Available at: http://www.reuters.com/article/2008/02/25/us-mcdonaldschina-delivery-idUSPEK34256620080225 (Accessed: 03 January 2015) 35 Segal, A (2014) How China Influences The Internet Available at: http://www.forbes.com/sites/adamsegal/2014/11/07/how-chinainfluences-the-internet/ (Accessed: 22 December 2014) 36 Shi, L (2012) Changes in income inequality in China in the last three decades China: Beijing Normal University Institute of Income Distribution 37 Sph (2014) Kenneth Chan: CEO McDonald’s China, APMEA Division President Greater China Available at: http://www.sph.com.sg/system/assets/1297/SBA %202014%20FinalKennethChan.pdf (Accessed: 03 January 2015) 38 Sportsbybrooks (2008) McDonald’s Ad: “I’m Lovin’ It When China Wins” Available at: http://www.sportsbybrooks.com/mcdonalds-sellsout-to-the-chinese-at-olympics-18687 (Accessed: 06 January 2015) 39 Stephens (2009) Commercial Franchising in China Available at: http://www.stephens.com.au/Sites/2196/Images %20Files/Articles/Commercial%20Franchising%20in%20China.pdf (Accessed: 18 December 2014) 40 Stojic, D (2010) Doing business in China - The case study of McDonald's Diploma Thesis University in Ljubljana 41 The Hofstede Centre (2014) What about China? Available at: http://geert-hofstede.com/china.html (Accessed: 21 December 2014) 42 Tschang, C (2008) Olympic Sponsors Cheer the Home Team Available at: http://www.businessweek.com/stories/2008-0528/olympic-sponsors-cheer-the-home-teambusinessweek-businessnews-stock-market-and-financial-advice (Accessed: 03 January 2015) 43 Vignali, C (2001) 'McDonald's: "think global, act local" - the marketing mix', Bristish Food Journal, 103(2), pp.97-111 44 Watson, J.L (1997) Golden Arches East: McDonald's in East Asia California: Stanford University Press, p.39 24 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 45 Wilson, K (2014) China packs on the pounds Available at: http://www.chinadailyasia.com/asiaweekly/201407/18/content_15150295.html (Accessed: 19 December 2014) 46 Yiwen, Z (2009) Fast Food In China Available at: http://cbl.chinadaily.com.cn/2012-10/10/content_15807594.htm (Accessed: 03 January 2014) 47 Zhou, L and Zhang, Q (2012) Cultural adaptation pattern analysis of McDonald’s and KFC in the Chinese market Master Thesis Uppsala University APPENDICES Appendix 1: McDonald’s Profile History of McDonald’s McDonald’s is an America multinational company headquartered in Oak Brook, Illinois, United States McDonald’s initially started from a small hamburger stand in Bernardino, California by brothers Richard and Maurice (Dick and Mac) McDonald For the purpose of enhancing their business, Dick and Mac temporarily closed their business for alterations and re-opened in late 1948 after three months Since then it operated as a self-service-drive-in restaurant, serving simple menu with nine key items such as hamburgers, cheeseburgers, shakes, French fries and three soft-drinks flavors… In 1954, Ray Kroc, a distributor of milk shake mixers, visited McDonald’s and known that McDonald’s brothers are seeking the opportunity to go nationwide Along with his interest in the fast-food industry, Kroc signed a franchise agreement with Dick and Mac 25 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 McDonald and opening his first McDonald’s in Illinois in 1955 The number of restaurants grew to 100 by 1959 (MarketLine, 2014, p.5) Ray Kroc- The franchiser of McDonald's Later in 1961, Ray Kroc purchased the interests of the McDonald’s brothers along with rights to the McDonald’s name for $2.7 million and led its worldwide expansion [ CITATION McD15 \l 1033 ] Thanks to Kroc’s management talents, McDonald has thrived to leading quick food service with more than over 35,429 restaurants in more than 119 countries as today (MarketLine, 2014, p.19) World-famous Golden Arches logo Currently, McDonald’s and the Golden Arches have become an internationally-recognized symbol of quick-service hamburgers, fries, chicken along with business direction of CEO - Dom Thompson [ CITATION Ent14 \l 1033 ] Description of business  Types of restaurants: McDonald’s restaurants are operated by either company based or franchised to third parties Of the 35,429 26 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 restaurants in 119 countries at year-end 2013, 28,691 (80%) were franchised and 6,738 (20%) were operated by the company  Products: McDonald’s restaurants offer a substantially uniform menu, although there are geographic variations to suit local consumer preferences and tastes McDonald’s menu includes hamburgers, cheeseburgers, French fries, several chicken sandwiches, soft drinks, coffee…  Number of employees: Number of employees worldwide, including company-operated restaurant employees, was approximately 440,000 as of year-end 2013  Segments: McDonald’s break down their operation into distinct geographic segments, which includes: United States, Europe, and Asia/Pacific, Middle East and Africa (APMEA) and other countries (Canada and Latin America) The U.S., Europe and APMEA segments account for 31%, 40% and 23% total revenues respectively France, Russia and Germany account for 67% of Europe’s revenues; and China, Australia and Japan account for 54% APME’s revenues These seven markets along with the U.S and Canada are major markets which comprise 75% of total revenues  Competitors: McDonald’s has a lot of competitors like Burger King, Subway, Yum, Wendy’s, KFC, Pizza Hut… (McDonald's, 2013) Present in the Chinese market KFC’s great success during a short period of time spurred McDonald’s to China, a country that embraced the opening-up and reform policy in 1978, when Chinese curiosity about the West was at a peak In 1990, McDonald’s set up the first outlet in China in Shenzhen The Western restaurant chain has been expanding steady and successfully The success of the Shenzhen outlet prompted McDonald’s to expand its chain nationwide [ CITATION Liu08 \l 1033 ] 27 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 In 1992, the largest McDonald’s restaurant was opened in Beijing With 700 seats and 29 cash registers, the Beijing McDonald’s served 40,000 customers on the first day of business [ CITATION Wat97 \l 1033 ] In 2005, McDonald’s opened the drive-thru outlet in China This new service is really successful since the number of car owners has been increasing in China China is growing faster in China than in United States with 2,000 restaurants and over 80,000 employees under the leadership of Kenneth Chan from 2009 [ CITATION Liu08 \l 1033 ] Appendix Brand Delive ry Servic e Hotlin e Delivery term and service commitment Convenien ce index Area: Inquiry needed Pizza Hut Home Service Time: 10am - 10pm Yes Yes Minimum consumption: No  Delivery service charge: yuan McDonald’ s (McDeliver y) KFC Delivery Yes Yes Area: minutes by electric bike from nearest restaurant within Fifth Ring Road Time: 24 hours Minimum consumption: No Delivery service charge: yuan Service commitment: Delivery in 20-30 minutes Yes Yes Area: Inquiry needed Time: 10am - 10pm (inquire about delivery time at restaurants) Minimum consumption: No (used to be 100   28 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 yuan) Delivery service charge: yuan Service commitment: in case of force majeure delivery services could not be provided Area: 15 minutes on foot from the nearest restaurant Kungfu Yes No Time: Open hours or restaurants (actual time of delivery is different)  Minimum consumption: No Delivery service charge: No Service commitment: No Area: 15 minutes on foot or kilometers by bus from the nearest restaurants (If the distance is longer than the set limit, a one-way fare will be charged) Yoshinoya Yes No Time: Open hours of restaurants, orders should be made 60 minutes in advance  Minimum consumption: main courses, or 150 yuan per order Delivery service charge: No Service commitment: No Table 1: Convenience index of home delivery services offered by fast-food brands in Beijing [ CITATION Zha09 \l 1033 ] 29 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 30 ... http://www.businessweek.com/stories/200 8-0 528/olympic-sponsors-cheer-the-home-teambusinessweek-businessnews-stock-market-and-financial-advice (Accessed: 03 January 2015) 43 Vignali, C (2001) 'McDonald's: "think global, act local" -. .. Dissertation in International Marketing Halmstad University 21 SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 Doing Business (2012a) Doing Business 2012: Doing.. .SIM337 Contemporary Developments in Business Management Nguyen Thi Kieu Anh - ID 149078874/1 Contemporary Developments in Business Management SIM337 Prepared by: Nguyen