International Marketing

Introduction

The increase in the scope for international marketing has called for decisive efforts on behalf of managers. Managers need to recognize the significance of international marketing in placing an organization on the global business map. Global exposure is vital for an organization in the long run. Hence, managers must emphasize the development of skills, information, and aptitude to deal with the evolving concepts in international marketing (Berthon et al., 2012). The concept of international marketing arose from the economic interdependencies between various countries across the globe. The major factors that contribute to the interrelation between national economies are the rapid expansion of the internet, the inclusion of a global perspective in changing consumer preferences, and the evolution of an open world economy (Czinkota & Ronkainen, 2012). In this report, the international marketing efforts of McDonald’s in China are illustrated with relevant analysis of environmental factors that impact the international business expansion of the organization.

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Company Background

McDonald’s is one of the world’s best-known fast-food restaurants chain with an estimated turnover of 50 million customers daily. The company was established in 1940 by two brothers Dick and Mac McDonald. The initial place of establishment of McDonald’s was San Bernardino, California, USA. The vision for international business expansion was instated by Ray Kroc who hailed from Chicago and joined the two brothers in the business. The vision of Ray Kroc helped the organization span international boundaries and now the organization has approximately 32000 restaurants all over the world and the number is still climbing. This feat was achieved through the franchising model of market entry. McDonald’s plans to launch its new range of ‘Egg McMuffins’ in the various outlets in China have invited managers to review the existing situation and prepare an international marketing strategy for promoting the new product in a foreign market i.e. China (De Mooij, 2013). The expansion of an American company in China seemed far from impossible primarily due to political and cultural anomalies. However, the implementation of a credible strategy has enabled McDonald’s to validate its presence in China with a count of over 2000 McDonald’s restaurants. The introduction of a new product in the Chinese market is a challenging task for the managers at McDonald’s and hence a detailed plan for promoting the product should be formed (Fletcher & Crawford, 2013). The product i.e. ‘Egg McMuffins’ is included in the breakfast menu of McDonald’s and is a nutritious product equipped with proteins and an eclectic taste. Hence the organization has feasible prospects to consider the promotion of ‘Egg McMuffin’ in the Chinese market.

Before the discussion of the environmental factors responsible for the success of an international marketing strategy, the journey of McDonald’s expansion in China deserves a mention. The concept of fast food was not new to the indigenous population of China as they had plenty of fast food restaurants that served common and simple Chinese fast food and beverages. The native population’s dietary habits included rice, pork, noodles, and fish while McDonald’s menu included Hamburgers made from bread stuffed with beef patties (Li, Hsieh & Chang, 2016). This is the primary reason why the company should focus on formulating a functional international marketing strategy for the new ‘Egg McMuffin’. The first McDonald’s outlet was opened by a franchisee Daniel Ng in the year of 1975. The influence of McDonald’s on the native market was doubted by competitors whose views were rebuffed in the course of McDonald’s expansion in China. The extent of McDonald’s penetration into the Chinese market was evident from the consistent turnover of Chinese customers at different McDonald’s outlets in China despite the accidental bombing of the Chinese embassy in Belgrade which invoked demands for boycotting American food and beverages (Meissner, 2012). This level of international marketing success was possible due to the evaluation of the different factors of the market environment. This report deals with the environmental analysis of McDonald’s to introduce its new product the ‘Egg McMuffin’ in China (Majaro, 2013).

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Environment Analysis

The environmental analysis forms a major part of a business plan for international marketing. The prime difference between international marketing and domestic marketing is the complexity and multifaceted nature of the foreign markets. The role of international managers lies in understanding the reason for the complexities of foreign markets and their relevant implications in the context of international marketing management (Paliwoda & Thomas, 2013). Various models and theories have been suggested to study and analyze the environmental factors but the PESTEL analysis model proved to be an accurate solution for determining the feasibility of performing in a foreign market. This report deals with the different environmental factors which have an impact on international business expansion. The significance of socio-cultural influences on international marketing is immense. The disparities in social environment, religion, and culture have a huge impact on consumer behavior.

Political:

The political scenario of an international market is vital for deciding the strategy for organizational operations. Politics is a complex discipline or domain. The various facets of politics have a credible role in deciding the sustenance of a foreign business in the domestic market. Government policies are generally too harsh on foreign companies in terms of taxes and permits. Politics is one of the major considerations of international marketing managers to decide the options for investments and growth (Burgess & Steenkamp, 2013). The definition of politics in terms of international marketing is the attitude of governments towards a business. Politics can be considered the most diverse and unpredictable facet of international marketing. Therefore, managers have to face many hurdles while analyzing the political environment of a foreign market and deciding on plans of action. The uncertainty of political scenarios results in political risk (Fletcher & Crawford, 2013). The three types of government activities that affect the firm are restrictions on operations, discriminatory attitudes of governments, and physical interventions of government in business operations. McDonald’s entry into the Chinese market came at a time when the government was planning to build a fast-food network. In such a scenario the government opposed the entry of foreign companies as they were perceived as threats (Buckley et al., 2014). Thus McDonald’s had to face the same situation in China as it had to face in Russia. The initiative for molding into the Chinese culture worked for McDonald’s which has led to the sustenance of the organization in China.

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Economic:

Business and economics are two sides of the same coin. The responsibility of managers is to comprehend economic developments and find their applications in marketing strategy. The analysis of the economic environment requires the study of the environment from two different perspectives i.e. international and regional. From the international economic perspective, McDonald’s has to look for agreements and MOUs signed by world trade institutions that could foster its business in China (Czinkota & Ronkainen, 2012). The regional perspective of the economic environment requires an emphasis on the economic policies of China and the direction of market development. The analysis of both these facets of the economic environment helps managers evaluate their profitability alongside satisfying market demand and engaging in competition with existing businesses (Fletcher & Crawford, 2013). The major challenge of this approach arises when a diverse range of markets are considered for expansion. The varying directions of economic development can create obstacles to planning an integrated strategy. McDonald’s presence in China assists the Chinese economy. The model of market entry followed by McDonald’s i.e. franchising needs to be developed in areas of the country that are not explored by the organization.

Social:

The social facet of the market environment is an indicator of the similarities and differences in consumer behavior across the globe. It can be used to determine the required standards for international branding. One of the examples of McDonald’s adaptability is the Indian market. The Indian market consisted of around 40% of vegetarians who despised beef and pork. This hurdle was addressed by changing the content of the food items provided at Indian outlets. Vegetarian consumers were assured of the quality of the food through the preparation of vegetarian food in separate areas of the kitchen (Li, Hsieh & Chang, 2016). Innovative items on the menu such as McMasala and McImli are examples of the adapting nature of McDonald’s. Many factors are suggestive of the social environment in a foreign market and the opportunities for an international company like McDonald’s to expand its business in the concerned geographical territory (Burgess & Steenkamp, 2013). Populations around the world are growing and subsequently, the movement of populations around the world happens. The population statistics report that 2 out of every 5 persons live in China or India. Predictions show that the increase in population will reach peak heights. This factor will cause the globalization of needs. People belonging to a different nation will become consumers in another market. This will lead to diversification of consumer needs and the impact can be seen in the large expanse of urban areas. The increase in urban areas shows that the majority of the global population prefers urban locations. Thus the urban areas are markets that can address the needs of different customers. The behavior of customers can be represented as the social environmental factor to be considered for analysis. Social factors that have affected the operations of McDonald’s in China include media relations, alliances with trade and labor unions, and adapting to the culture in terms of the aesthetics of the business. The design of the franchise outlets of McDonald’s must be in tune with the culture of China which would offer the customers a reason to associate with the brand. Media relations including newspaper and television advertisements are crucial for developing a connection with the customers (Li, Hsieh & Chang, 2016). Deviation from one of the above-mentioned factors can disrupt plans and will amount to losses in revenue. For example, a newspaper in China revealed the fact that the employees in the Guangzhou outlet of McDonald’s were underpaid. This caused an uproar among employees in other outlets around China and thus McDonald’s had to accept the formation of a workers union and fix a uniform salary for all employees. Such critical reports in the media can demean the reputation of the company which is not favorable for a foreign company.

Cultural differences play a huge role in determining the sustenance of a company on foreign soil. The major cultural difference arises from language. Language differences determine the plan for promoting a product in the market, naming the product, and preparing an advertisement campaign. The failure of McDonald’s in Japan was the result of McDonald’s character, Ronald McDonald, whose face was perceived as a death mask. The effective operation of an international organization in foreign markets depends on the timely recognition of probable differences that may arise in foreign markets (Burgess & Steenkamp, 2013). Western firms can feel the impact of cultural differences in the early phases of internalization. However, the prominence of international brands like McDonald’s, Microsoft, Coca-Cola, etc. is an indicator of the beginning of the globalization of consumer needs. This is the prime reason for increased preference for foreign goods in domestic markets which forms suitable grounds for international business expansion.

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Technological:

The technological facet of an international marketing environment is considered a driving force for developing business. It also signifies the movement towards a global marketplace. The effect of technological improvements is observable in all aspects of international marketing. The proficiency of a company in gathering data related to markets, management control privileges, and the decision on the feasibility of markets for the company are essential technological activities (De Mooij, 2013). The introduction of satellite communications, ISDN, cable, e-mail, internet, and social media networks has an impact on the consumer as well as market behavior. The McDonald’s website and internet access allowed the population to view the brand and this initiated brand connection. Every new product or service that is offered in the market must be promoted on social media networks as well as on the local print and telecast media which increases the recognition of the product. One example of McDonald’s initiative to achieve the use of technology was its partnership with the Chinese online shopping website ‘Taobao’ which was popular in China. Special offers and discounts for online shoppers and distribution of promotional items increased the chances for promotion of the new ‘Egg McMuffins’ in China. Home delivery services offered by McDonald’s also involve inventory maintenance and scheduling deliveries which are capable of offering a competitive advantage over other organizations (Li, Hsieh & Chang, 2016).

Ethical:

Ethical issues are bound to arise in different cultures. Employees are bound to an organization by certain ethical standards and similarly, the organization shall also abide by ethics in operation. The different types of market environments have created different types of challenges while competing in foreign markets. The key to adapting to a foreign market is understanding the culture of the country and deciding the employee behavior trends. Employee behavior at work comprises responsiveness to the company values and objectives, subordination to authorities, and proper execution of responsibilities. An organization has to reflect the same ethical standards in its operations (Czinkota & Ronkainen, 2012). Bonuses and incentives regularly, proper payment schemes, and moderate working rules are the organization’s ethical responsibility. Corporate social responsibility is also included in the ethical facet of the environment of international markets. A company needs to embark on initiatives to benefit society which will help in gaining the appraisal of consumers as well as governments and local authorities. The initiatives for sustainable development of the environment and mitigation of harmful impacts of production processes are ethical procedures required from a company established in a foreign market.

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Legal:

Legal implications of the international marketing environment include the legal policies in the foreign market which impact the international marketing efforts. Legal entities are different in content and comprehension (Buckley et al., 2014). The legal obligations of an organization are not just restricted to the domestic law. The company has to adapt to the legal standards of the host country and the growing domain of international law. The acceptance of a product in a foreign market is dependent on specific legislation regarding packaging and safety. The managers must know the legal environment of the market in which they intend to start a business. The domain of law is classified into three dimensions namely local domestic law, international law, and domestic laws in the native country of the firm. Managers shall rely on legal expertise relevant to varying legal environments which will offer clarity on the nature of the legal approach required to survive in the foreign market (Turnbull et al., 2012). International laws comprise world trade agreements, laws related to patents, and treaties. Domestic laws can provide facilities such as free export of certain materials. Another implication of domestic law helps the organization to abide by the regulations and discipline of the native country.

Globalization is the key to different populations worldwide. As discussed previously in this report, urbanization has led to the movement of populations. Thus demand behavior and supply trends have evolved and a new world marketplace is being created. International markets are places of intense competition. Various advanced countries are facing threats from emerging businesses and tend to place restrictions on their expansion. The challenges faced by a company like McDonald’s to expand its business in China were adequately handled in the past. The competition in the market from other firms was minimized by appreciating and adapting to the culture (Terpstra, Foley & Sarathy, 2012). The operations of McDonald’s were functional in replicating the US model while keeping the consumer tastes unchanged. The adoption of local cuisine in its menus has provided McDonald’s a competitive advantage over other entrants into the market. The restaurants were designed like coffee houses which invited a lot of consumers for a hearty breakfast and thus the new product ‘Egg McMuffin’ was able to get to the notice of consumers.

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McDonald’s also executed a change in strategies while entering foreign markets like China. To succeed in foreign countries McDonald’s needs to understand the cultural differences of Asian countries. McDonald’s has to adopt innovative strategies for product localization and novel product offerings according to different tastes and needs. McDonald’s has shown credible examples of introducing new products in foreign markets to sustain itself in those markets. For example, the decision of McDonald’s to use chicken in all food preparations instead of beef or pork proved to be a feasible marketing strategy in India. The company attained public attention through large-scale advertisements (Paliwoda & Thomas, 2013). The only method to stand up to the competition is to have an integrated strategy for brand promotion that vouches for higher and uniform identification across the various geographical divisions of the foreign country. The core objective of McDonald’s is product recognition through standards. An organization establishes a product image by providing facilities required by customers and that too according to specified standards. This will attract a larger consumer base and thus increase profits. The efficiency of international marketing of an organization is judged by the uniformity of services across different geographical domains. If a customer is happy with the products or services from one outlet of an organization in London then the customer should experience the same in another outlet of the organization in Paris. This objective has been realized by McDonald’s through a unique innovation (Rana & Sharma, 2015). The fast food restaurant chain minimized the skill required for making the food items. The raw materials required for the production of food products such as frozen meat and bread were delivered uniformly to all locations. This ensured a uniform quality in products of McDonald’s all over the world and better experience for customers.

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Conclusion

The observations from the analysis in the above report suggest that McDonald’s intentions to introduce their new product ‘Egg McMuffin’ in China need to be evaluated by environmental factors. The different environmental factors discussed above included the political, economic, social, technological, ethical, environmental, and legal facets of the environment of a foreign country. The foundation of international marketing is dependent on these factors since a marketing plan for international expansion can be derived only through the analysis of the factors. Competitive advantage, political risks, economic developments, the inclusion of new technologies, and consistent changes in legal regulations are some of the key elements that are the outcomes of environmental analysis (Majaro, 2013). The necessity of environmental analysis is justified by the fact that environment analysis involves the collection of quantifiable data and thus can be used to derive the relations between the different factors. The above report concludes that environmental analysis is presently the most productive resource in international marketing.