Title: Understanding Culture and Diversity for Business- Individual case study of McDonald’s in china
With globalization and international business communication, increasing number of enterprise are seeking for business opportunities in foreign countries. Global business is becoming a core strategy for many enterprises, particularly MNCs. For international business, an important issue is the challenge of culture diversity. The cross cultural communication and management is proposed to be the key for the success of MNCs global development. In the service industry, McDonald’s is a very typical case with international expansion of over 120 countries. It is the largest international fast food restaurant. The domestic culture of McDonald’s is the American culture. In different countries, it generally makes adjustments in management, products and services according to local culture. The china market is one of the major market for McDonald’s, and the culture diversity between china and America is also significant. This study wants to explore the culture and diversity related to McDonald’s in china market by applying the dimensional theory and models for culture diversity.
There are three objectives distributed in three chapters in this study. The first objective is make some case example based analysis according to the challenges of corporate identity that diversity and culture present to McDonald’s, and then critically discuss the challenges based on the dimensional model. The second goal is to make some assessment about how McDonald’s takes advantages of the cultural diversity to improve the identity of corporation. And the final goal is to make some suggestions on application of culture and diversity in the future. In the final chapter, a conclusion and some reflections will be presented.
2 Challenges that diversity and culture present to McDonald’s by Trompenaars’ model of national culture
Diversity is a complex conception based on different contexts. Dimensions of diversity include primary and secondary ones (Loden and Rosener, 1991). According to the definition of Doole and Lowe (2008), culture can be defined as sum of beliefs, values, and customers that influence the behavior of consumers (Doole and Lowe, 2008).
McDonald’s is well known for its diversity. It has over 60 thousand employees in the work. Culture difference is a significant contributor to diversity. In work situations, diversity and culture may cause emotional and attitudinal challenges, cognitive challenges and practical challenges. For multinational corporations, it is vital to establish the cross cultural awareness. Cultural differences can occur in many ways, such as the communication, the attitudes, the decision making style, the approach to finish a task, the way to make corporation and so on. For example, communication challenges in cross culture situation could be language, gestures, body language and meanings and so on.
In previous studies about culture and diversity, different models are presented, such as the Lewis model of cultural types, the Trompenaars’ model of national culture and so on. Trompenaars’ model of national culture is developed by Fons Trompenaars and Charles Hampden-Turner to characterize the cross cultural communication in global business and management (Hampden-Turner and Trompenaars, 1997, Hofstede, 1996). Based on a large scare survey, they summarized the culture differences between different nations into seven aspects, five related to the relationship between human beings, one about time and the other related to environment.
With these seven dimensions, culture differences can influence international management in many aspects, such as the working attitudes, the motivation for achievement, the time and future, and ethics and standards of conduct and morality. For example, the relationship may be significant in china when dealing with employees within firm or suppliers, but western staff of McDonald’s are not good at it. In the management system of McDonald’s in home country, the planning and punctuality are strictly required, but such requirement may be not applicable among Chinese staff. Employees in china have strong dependence on the working environment, so the enterprises should try to encourage them more with confidence and create a good working environment.
Table 1 comparison between china and America by Trompenaars’ model of national culture (Mind Tools) (Chan, 1999)
Trompenaars’ model of national culturetype and characteristics: china (the host country)type and characteristics: America (the home country)Universalism vs. ParticularismParticularism: people are likely to change their behaviour under different situations with different people. Relationship matters.Universalism: people lay high emphasis on laws, obligations, rules and values and fairness. Rules come first before relationship.Individualism vs. CommunitarianismCommunitarianism: group is more important as it provides them with safety and help. So they are loyal to the group.Individualism: personal freedom is more important. People want to make their own decisions and care less about the group.Specific vs. DiffuseDiffuse: relationship is important in business success. There is an overlap between work and personal life.Specific: personal life and work are separated from each other. Relationship is not so important to successful work. Neutral vs. EmotionalEmotional: people want to express their feelings at work.Neutral: people have high control of emotions and feelings.Achievement vs. AscriptionAscription: people value power, title, position and fame, which define their behaviour.Achievement: people are valued by their performance despite the power and status.Sequential Time vs. Synchronous TimeSynchronous Time: people do not have clear schedules, and they may work flexibly with several projects in one time.Sequential Time: planning and punctuality are very important when doing things. They stay on the schedules and time is money. Internal Direction vs. Outer DirectionOuter Direction: environment is believed to be significant to their work. They also prefer to avoid conflicts and have reassurance to be confident.Internal Direction: people are confident about their personal control in themselves or in environment.
3 Assessment on how McDonald’s has attempted to take account of cultural diversity to promote and improve corporate identity
McDonald’s entered china market in 1990. It is well known for the globally standardized products, services and management systems. Since the branding activity of “I’m loving it”, McDonald’s applied the branding promotion on the global region at the same time (Zhang and Zhou, 2012). However, in order to get adapt to the culture diversity and take advantage of it to improve business, McDonald’s has made some significant strategies and efforts.
Localization of products to cater to Chinese tastes
According to the definition by W3C, localization means the adaptation of product, application or document to local culture, language and other characteristics of a specific market (Henderson, 2016). Being a fast food chain, the products of McDonald’s are standardized. However, it makes some localization adjustments according to the consumer behaviour in china, including both diet preferences and consumption ability. There are many Chinese food elements in the menu, such as such as the Spicy Chicken Sandwich, scrambled eggs and tea based drinks and so on (Yu and Zhang, 2009).
It improves the diversity of products, gives consumers more opportunities to make decisions, and satisfies the demands of local consumers. In addition, the raw materials are also purchased from china. The localization of raw materials is a cost saving plan. More importantly, it also makes McDonald’s a fast food brand from western culture that respect the eastern ones, and thus improves the identify in china.
Marketing with localization, position and expression of corporate culture in china
The marketing mix includes public relations, promotions, and other marketing communication strategies (Borden, 1964). In china, McDonald’s lays emphasis on the local culture, traditions and habits. For example, spring festival is the most important traditional festival in china, so McDonald’s promoted mascots with Chinese culture elements for promotion (Xu, 2012). The activities have diverse aspects, such as the decoration of local stores and special offers, as well as decoration presents for Chinese customers that can be used at home. These traditional festivals are related to the unique culture of china, which are then taken advantage of by McDonald’s to improve marketing communications and identity (Zhang and Zhou, 2012).
The corporate culture of McDonald’s is about happiness, particularly happiness with family. In America, it is famous for fast, cheap and convenient. But in china, some of the stores are more like a place for leisure and entertainment. In the home country, McDonald’s targets at general citizens. But in china, McDonald’s targets at the middle class, families with middle to high level of income (Yu and Zhang, 2009). And the emphasis of marketing communication is the young generations. While for people with limited financial ability, McDonald’s is not a place that they can come to eat frequently. So the price of McDonald’s in china is much higher than that in the home country. In china, McDonald’s is a symbol of western culture as well as modern life style. For example, many of the McDonald’s stores have a special children's park, where the children can come to play with children's slide, building block and so on.
According to the research, McDonald’s targeted at family with children before 2003. While the youth from four to 30 years old become the new targets after 2003 (Xu, 2012). In order to be consisting with the key word of “young, fashionable and lively”, McDonald’s invited Chinese famous stars for marketing, such as Ming Yao (McDonald's Annual report, 2003). In order to assess the impacts of changing targets on performance, Xu (2012) carried out a questionnaire survey among Chinese consumers. The results indicated that such adaptation achieved identification success in china.
In china’s culture, going out to eat is always an opportunity for communication with friends and relatives. So McDonald’s provides such a place for Chinese consumers (Zhang and Zhou, 2012). People come to McDonald’s not only for food, but for experience of a different life that includes entertainment, leisure and experience. When they eat at McDonald’s, Chinese consumers are also undergoing culture integration with the western ones.
Localization management in human resources management
Localization of human resources is the core diversity management strategies for international enterprises (Fey et al., 1999). Due to the role of employees, it is also the fundamental guarantee for the localization of marketing, operation, products, management and corporate identity and so on (Lu and Bjorkman, 1997). For the over 50 thousands employees in china, over 99% of them are Chinese employees. Particularly, the managers and senior managers are also selected from china, who are very familiar about local culture (Xin, 2012).
Among these Chinese employees of McDonald’s, there is also diversity in gender, age, personality, education background and characteristics and so on. In workplace, diversity is not only about the way people perceive themselves, but how they think of others, which influence the interaction with each other. Diversity has many benefits to organization, such as the increase of adaptability, the broader service range, the variety of viewpoints, and higher level of efficiency and so on (Josh Greenberg, 2004). Particularly, the diversity of workplace is proved to have significant economic benefits (Noe et al., 2006).
In order to recruit talents, McDonald’s used diverse media to widely disseminate recruitment information, such as poster, leaflets and social media platforms. It launches a series of online recruitment campaigns to attract more young employees. Each year in the spring and autumn, McDonald’s will come to campus and open doors for the graduates. They are provided with opportunity to upgrade and enter the management.
The training and learning system of McDonald’s is also a significant effort. Different training programs are designed for employees in different positions and demands. As china is a big country, where the east and west, north and south could be different in cultures, the plan is also regional designed, and the contents will consider the local market environment.
The payment and rewarding system in china is different from the home country. It applies the localization strategy to define the basic payment. Every year, McDonald’s will make research about the salary in china market, and make adjustments. In addition to the general leaves and holidays, McDonald’s offers special welfare for employees during the unique festivals in china, such as the national days, the spring festival, and the moon festival and so on.
Equal employment opportunities (EEO) means that the enterprise provides equal opportunities and offers for employees. They have the chance to do the best according to their potentials. In the employment system of McDonald’s, they hire employees based on their merits and promote based on talents. They also have fair career development opportunities. So over half of the managers are promoted from staff of McDonald’s.
Localization of human resources have many advantages. Firstly, local talents could help McDonald’s better get adapted to the china’s political, economic, social and cultural environment. It not only saves costs, but also establishes good image. Secondly, the localization of human resources could enhance the relationship with local consumers. And thirdly, it is beneficial for culture integration and communication (Lasserre and Ching, 1997).
The localization strategy of human resources allows McDonald's to reduce the amount of training costs incurred by expatriates, costs to monitor, the cost of travel and even allowance, so the company could obtain higher profits. In addition, the use of Chinese personnel as managers could to the maximum achieve optimal allocation of human resources. The company's mobility will be greatly reduced and thus the costs of re-employment will be reduced.
In previous studies, a word of McDonalization was developed by sociologist George Ritzer in order to describe the culture and diversity management of the company in different markets (Ritzer and Stillman, 2003). McDonalization refers to the reconceptualization of rationalization and scientific management. Due to the practice of McDonald's and the globalization, more countries have adapted to this conception.
4 Suggestions on how to benefit from culture and diversity in the future
China has a long history with ancient culture. Since the reform and opening up policy, some aspects of Chinese culture are changing. However, there are some culture elements that has been penetrated into people’s life, so the respect of tradition will always matter. Particularly, the tastes of food will not change in a short term. Therefore, all the foreign companies including McDonald's should consider cross cultural adaptations.
However, culture is not constant (Samovar et al., 2015). It is worth noting that the younger generations are changing more significantly. Due to globalization, Chinese young people are becoming westernized, particularly by the America culture. Since McDonald's targets at the young groups, it should consider such dynamic changes in Chinese culture and make relevant responses (Xu, 2012).
Among the young generations, a major challenge is how to keep attract the young generations. In fact, McDonald's is facing a hard time in china. More than 20 years ago, McDonald's entered china with a new culture. Due to the curiosity of Chinese consumers towards a new culture and new lifestyle, McDonald's began to be popular among the Chinese middle class. However, the fierce competition and the changing of buying behaviour is making consumers become less attractive by the western fast food, not to mention the competitor KFC in china. For example, the young consumers seek for healthy diet, while the food in McDonald's are not health enough. More consumers are also using digital devices and internet to make orders. They have significant dependence on the technology, which many be a leading indicator of the future life.
The young generations in china is bring a new culture to the country. For example, a new group of Chinese youth, the generation Z is evolving, which like reformed Confucius thinking. They have their own terms and define the modernity in a new way (Kochhar, 2011). These millennials want to express their individuality, so their buying behaviour would be related to freedom, creativity and individuality (Doctoroff, 2015). Moreover, their buying powers are also increasing (Russell, 2016).
In addition to the adaptation towards consumption behaviour, there are also suggestions for the franchise Operations of McDonald's in china’s localization. Some of the alliance business did not follow the regulations of McDonald's, and thus lead to Equity dispute. While in January, 2017, McDonald's sold 80% of the stake in china to a Chinese state-owned enterprise. The operation of the company in china may be quite different controlled by a Chinese enterprise (Peter Guy, 2017). This would be a good opportunity for McDonald's development in china market. With increasing control in host country, McDonald's could be of more localization.
In summary, this study explores the culture and diversity management based on case of McDonald’s in china. McDonald’s is one of the most successful MNCs in china. There are significant culture differences between the home country and host country for McDonald’s. Based on the Trompenaars’ model of national culture, the Chinese culture and American culture have typical differences, which could bring challenges for McDonald’s expansion in china market, such as the consumption behaviour, the working attitude and relationship. The differences occur within organization and outside organization when dealing with consumers or business partners. However, McDonald’s has tried to handle these differences with many strategies, such as the Localization of products to cater to Chinese tastes, the Marketing with localization, position, targeted consumers and expression of corporate culture in china, Localization management in human resources management and so on. It also sells over 80% of the stock to a China own enterprises. These strategies effectively reduced the challenges brought by culture differences. However, challenges in china market are also worth noting, such as the threat of competitors, the changing of china’s culture, particularly the changing of consumption behaviour among the young generations, who are the targeted consumers of McDonald’s in china. Some of the culture characteristics will not change in future considering the long history and the necessity for inheritance, while the integration with western culture will continue. Therefore, the culture and diversity management in china should also be dynamic.
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