Republic of the Philippines

RIZAL TECHNOLOGICAL UNIVERSITY

Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

CASE STUDY: MCDONALD’S IN CHINA

Submitted by:

De Guzman, Jemaica M.
Murillo, Sherylyn N.
Pradillada, Kim Andrey A.

CBEA – 20 – 501P

Submitted to:

Instr. Donato Z. Estocado, MBA

SEPTEMBER 2022
Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

I. INTRODUCTION

McDonald's Corporation is a well-known American fast food restaurant chain and

one of the biggest in the world. It is famous for its hamburgers, particularly its Big Macs.

Chicago houses the corporate headquarters. The McDonald brothers, Maurice ("Mac")

and Richard, created the first McDonald's restaurant in San Bernardino, California, in

1940. It was initially a drive-in that had a large assortment of goods. However, the brothers

decided to redesign the company in 1948, and shortly after a three-month remodeling, a

McDonald's as they had envisioned was launched. The tiny restaurant was built to serve

a lot of food for a low cost. McDonald's is renowned throughout the world for its quick

service and friendly staff. Above everything else, they think that serving their clients

comes first. McDonald's also conducts routine quality control audits in its restaurants to

ensure that food safety is being maintained. McDonald's routinely produces tasty

hamburgers, crunchy fries, and frosty shakes that are in high demand in China.

McDonald's made the decision to enter China in 1990 as part of its global

expansion since the Chinese market had enormous potential. China had seen a rise in

the number of urban residents, a change in consumer buying patterns, and the influence

of western brands over time. Since then, it has gradually grown to become the most

prosperous. There was little competition for western food when it first entered the Chinese

market. The success of the Shenzhen location gave McDonald's the push it needed to

grow its franchise nationally. On April 23, 1992, a large McDonald's restaurant opened in
Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

Beijing, becoming the chains second in China and it was situated in a popular retail district

of the city.

II. BACKGROUND

Outside of the United States, McDonald's has China as their top growing market.

Most Chinese people find the dish to be more pleasant because it is less fatty and sweet.

In China, McDonald's is a favored Western restaurant of both children and adults.

Although McDonald's has slowed the process of expanding its branches in China, it still

provides customers with reasonable prices and excellent service.

A local reporter in Shanghai secretly recorded video of tainted meat being

processed inside a facility in July 2014. That factory was Shanghai Husi Food, a division

of the OSI group, an American company. The video shows employees processing

substandard meat as well as expired meat products. The Shanghai Municipal Food and

Drug Administration was compelled to look into the processing facility after the video went

viral around the nation. Following an investigation, the authorities discovered that 3,000

cases of tainted beef had already been distributed, along with expired animal items

(chicken and beef) that had been packed and processed with new expiration dates. The

humiliation peaked when Shanghai authorities detained six employees of OSI Group, the

main meat supplier to McDonald's, for selling out-of-date meat to the country's

McDonald's, KFC, and other franchises. Following the incident, McDonald's in China
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RIZAL TECHNOLOGICAL UNIVERSITY
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experienced a three-week meat and chicken shortage. Their description of what went

wrong tells the tale of a U.S. corporation that, in certain situations, was unable to

understand what local Chinese management were doing. Even if local plant rules and

paperwork had been translated from Chinese to English, OSI's American managers rarely

visited.

China's authorities immediately prohibited the import and sale of goods processed

by Husi Food Group after the problem came to light. The popular chicken nuggets and

chicken fillets from McDonald's were no longer being sold as a result of the ban in several

of their Shanghai locations. Furthermore, because the Husi Food Plant supplied the

Japanese branch of McDonald's, it was also impacted by this controversy. McDonald's

restaurants across the nation have stopped importing its chicken nuggets from China in

favor of employing alternatives like tofu and fish. With McDonald's Japan reporting a large

60% year-over-year fall in the net income and 4% decline in sales for the six-months

ended June 2014 period, as a result of shop closures, the corporation was already having

financial difficulties in Japan prior to this controversy.

III. ALTERNATIVES

CNN Money reports that the renowned international fast-food chain McDonald's

has legally changed its name in China. Jingongmen, which loosely translates to "Golden

Arches," has replaced the company's former name in the nation, Maidanglao, which is a
Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

Chinese translation of "McDonald's." The "Golden Arches" term has been used by

McDonald's for many years, so it doesn't seem like the upgrade will have a significant

impact on the company's Chinese operations. This decision is an alternative solution for

the brand’s scandal to start a new and meet the needs of business development.

SWOT ANALYSIS: STRENGTHS – The Company’s extraordinarily strong brand

identification, which effectively sets it apart from all other fast food restaurants all over the

world, is one of McDonald's most notable advantages. This is particularly true in China,

where McDonald's food and the cuisine served in Chinese restaurants and fast-food joints

are very different. The business can deliver intriguing new goods and services, such as

the McCafe, a café with a drive-thru and a sit-in area. Even China's elite class

acknowledges the excellent customer service provided by McDonald's. The majority of

customers concur that McDonald's provides trustworthy, safe products, quick service, a

pleasant dining atmosphere, and courteous, accommodating staff.

WEAKNESSES – When compared to several other local Chinese fast-food

restaurants in China, the cost of McDonald's is still expensive. Furthermore, many

Chinese people still find it difficult to afford McDonald's; many working parents

must put money aside before they can take their families there. Cooked beef

patties are a key component of McDonald's meals, however a Watson (2000) study

found that most Chinese people dislike the way they taste. Burgers are McDonald's
Republic of the Philippines
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College of Business, Entrepreneurship, and Accountancy

specialty everywhere else in the globe, however in China, this delicacy is not very

successful.

OPPORTUNITIES – The proportion of Chinese residents with discretionary

income is growing, and earnings are rising in tandem with the expansion of the

middle class in China. This reinforces the transition in Chinese culture toward a

more modern way of life, which is also changing the way they eat and introducing

them to fast food and Western cuisine. More people embracing Western culture

means more opportunities.

THREATS – In recent years, McDonald's has faced relatively few dangers, with

the rival fast-food company KFC posing the sole real danger in China. Yum Brands

is one of the biggest rivals of McDonald’s in China. Its main products contain

chickens which was traditionally well-known than beef among the Chinese. It also

had a well-developed distribution system that makes it to have an access in every

place aside from its main city centers.

Second alternative is the marketing managers at McDonald's Meat must

comprehend the basic needs and factors that influence those needs, conceptualize

products and services that can satisfy those needs and are within the realm of the

company's financial and intellectual capabilities, and finally create a marketing mix for the

whole market strategy.

Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

Third alternative, discuss a new McDonald’s Meat offering in terms of goods or

services. Launching a new product and promoting its characteristics, superior value

proposition, and distinctiveness is the classic marketing mix function. Boost McDonald's

Meat's market share. Marketing initiatives can be used to boost market share either by

encouraging higher sales to existing customers or by encouraging higher sales to new

customers.

IV. PROPOSED SOLUTIONS

McDonald's could leverage its innovation capabilities to better meet the demands

of the Chinese market. Even though the company is well-known and easily recognizable,

provides high levels of customer service and customer satisfaction, owns advantageous

locations, and employs an excellent marketing approach, these advantages will be

lessened if the company's core products are not sufficiently appealing to a broad range

of customers. Its primary products are burgers, thus the firm should concentrate its

attention on enhancing the quality and flavor of these goods, before introducing other

options to the menu.

The staffs and management must double the security of the products as well as

the production of it especially the expiry date and manufactured date to avoid

endangering health of the consumers and also the reputation of the company. A day to

day inventory of the products must be strengthen its focus to ensure the safety of the
Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

products to the customers. McDonald’s in China must produce burgers and other

products that will fit to the tradition and culture of Chinese to increase its sales more and

the prices of the products must be affordable to the consumers not only to those who are

capable of. They may not be able to keep up with the local market because tastes might

differ with local markets, pricing can also vary, and buyers tend to favor low prices.

V. RECOMMENDATIONS

McDonald's strategy in China may include prioritizing the development of products

with novel or differentiated characteristics to meet the local market's needs better.

Thus, the product development strategy is advocated as a more suitable option.

 To begin, the organization has the means and ability to produce the necessary

wares. To better suit the needs of the Chinese market, McDonald's, as one of the

leading fast-food firms, may be able to manufacture new goods with new tastes.

 Considering the size and growth potential of the industry, it would be wise for the

company to invest extensively in R&D to create innovative products, with the

expectation that some of them may prove to be commercially successful and reap

incalculable rewards.

 McDonald's China is under increased pressure to adapt to local tastes rather than

rely on international standards because of cultural differences between China and

the West regarding culinary preferences.

Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
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College of Business, Entrepreneurship, and Accountancy

 Throughout China's long history, regional differences in food preferences have

emerged, with them favoring rice dishes. Given these differences, catering to the

specific tastes of each region's consumers would necessitate tailoring products to

meet the demands of each region's market.

 McDonald's China has moved its attention to burgers, although many consumers

will resist the change due to cultural preferences.

 As a result, customers in China would view McDonald's China as separate from

McDonald's locations in New York or Kuala Lumpur, as well as from other vital

rivals, due to the restaurant chain's tailored new menu that would stockpile

services to meet the demands of customers and carry peculiarity within.

 Capability to create novel products with top-notch features to acquire the preferred

wants of Chinese consumers.

VI. CONCLUSION

 McDonald's has a highly centralized corporate structure, which allows the

company's upper echelons to have considerable influence over all restaurants

operating under McDonald's name. Since the company's upper management may

make decisions centrally, all chain restaurants are held to the same high

standards. At McDonald's, the chairman and CEO sit at the top of the corporate

ladder, with the COO just below them. Human Resource Management,
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RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
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Advertising, Internal Audit, Law, Licensing, Financial, Program Management,

Security, the Distribution Network, Sanitation, and Security are all examples of

functional departments. The level of individualism in China is minimal when

compared to Western countries. The Chinese are fascinated by and eager to

absorb the customs of other cultures. The Chinese McDonald's emphasizes

familiar American staples like chicken, potatoes, milk, and bread. American fast

food is more prevalent among Chinese people than Chinese fast food.

 On the other hand, McDonald's promises that its products will meet the standards

of Chinese consumers, including a reduced calorie count and an emphasis on

vegetables and cereals, without compromising the quality of the chain's signature

dishes. The Chinese, for instance, eat chicken, so McDonald's gives their chicken

more of a Chinese twist. Consequently, the company creates a method for

identifying and cultivating future leaders among the employees. Those selected for

upper-level administrative and management positions at the corporation are put

through a rigorous four-week training program before they can begin their new

jobs. There is a wide range of ages and sexes represented in the workforce. Both

full-time and part-time work schedules are accepted at McDonald's China. That

way, employees who are also students may make some money and put it toward

their education. In addition, the firm has strong relationships with the neighborhood

and the local college in China, where courses relating to the food sector are taught.
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RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
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McDonald's in China is ahead of the competition because of its innovative strategy

for recruiting and retaining top talent.

VII. REFERENCES

 Bloomberg. (2010). McDonald’s Raises China Prices on Higher Costs. Retrieved

from: http://www.bloomberg.com/news/20101117/mcdonaldsincreaseschina-

pricesonhigherrawmaterialcostsfromtoday.html

 Crireport.com (2011). RESEARCH REPORT ON CHINA FAST FOOD

INDUSTRY, 20112012. Retrieved from: http://www.crireport.com/240research-

reportonchinafastfoodindustry20112012.html

 Leadership. (2017). McDonald’s Corporation. Retrieved from:

http://www.aboutmcdonald.com/mcd/our_company/leadership.html#steve-

easterbrook

 ExamineChina.com Blog. (2021, May 12). McDonald’s in China – Success of a

Western Brand in China. Retrieved from

https://www.examinechina.com/blog/mcdonalds-in-china/

 Team, T. (2022, September 9). McDonald’s Faces Declining Sales in Asia after

China Food Scandal. Forbes. Retrieved from

https://www.forbes.com/sites/greatspeculations/2014/09/11/mcdonalds-faces-

declining-sales-in-asia-after-china-food-scandal/?sh=431685f36de1
Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

 Ayana. (2017, December 12). The History of McDonald’s in China. Retrieved from

https://blogs.transparent.com/chinese/the-history-of-mcdonalds-in-china/

 Fortune. Why McDonalds’ supplier failed in China. Retrieved from

https://fortune.com/2014/09/02/why-mcdonalds-supplier-failed-in-china/

 LaowaiCareer. Why is McDonald’s So Popular in China? Retrieved from

https://www.laowaicareer.com/blog/mcdonalds-popular-china/

VIII. TIMETABLE

YEAR
 The first McDonald’s in mainland

China opened in Shenzhen, in the

southern part of the country. As the

first Special Economic Zone in

 1980
China was established in 1980,

newly implemented liberal reforms

allowed Western brands to open

stores in China.

 Two years later, the second

 1982 McDonald’s restaurant in mainland

China opened in Beijing and was, at

Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
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College of Business, Entrepreneurship, and Accountancy

that time, the largest McDonald’s

restaurant in the world. On its

opening day, a thousand workers

served over forty thousand

customers.

 The first McDonald’s (also known in

 1984 China as Màidāngláo) opened in

Taipei in 1984.

 Businessmen were also curious

about McDonald’s management

mode. NBC news observed “when

 1990 McDonald’s first opened in China in

1990, these streets were clogged

with bicycles” (Griffith, “McDonalds

has a big appetite for China”).

 By 1996, McDonald’s had opened

 1996
twenty–nine restaurants in Beijing

alone.
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RIZAL TECHNOLOGICAL UNIVERSITY
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College of Business, Entrepreneurship, and Accountancy

 First McCafé in China was opened

in 2001, and the first McDrive – in

2005. As McDonald’s popularity

grew, all restaurants in China were

open 24/7. Due to its rapid

expansion in the Chinese market,

McDonald’s restaurants became an

 2001 – 2005
integral aspect of the Chinese

cities’ landscape. To gain more

patrons, McDonald’s started

employing a new strategy in China.

The brand reduced American

symbolism in China and

incorporated more menu options

with a Chinese twist.

 As of 2020, there are around 3,300

McDonald’s restaurants in China,

 PRESENT 150 thousand employees. By 2017

McDonald’s had served over

1.3 billion customers. Moreover,

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RIZAL TECHNOLOGICAL UNIVERSITY
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College of Business, Entrepreneurship, and Accountancy

McDonald’s Corp plans to nearly

double the number of stores in

mainland China by 2022. In line

with the popular statement “a small

step for us, is a large step for the

world.” McDonald’s in China is now

focused on serving organic and

sustainably grown food, following

the “green” trends in the world.

IX. MEASURE OF SUCCESS

Ultimate Objective

 McDonald’s growth in China When McDonald’s made their first debut in the

Chinese market; their target audience was middle-class Chinese citizens. At the

beginning of the XXI century, McDonald’s began appealing more towards a

younger audience due to increased marketing and rising pop-cultural impact.

Index Improvement

 One of the main reasons for the popularity of McDonald’s in China was its high

quality. Chinese media had reported widely on its clean dining rooms and kitchen,
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fresh ingredients, strict quality control, high standards, etc. The media commended

its standardized procedures of food production, recipes, and modern management

techniques. McDonald’s repeatedly emphasized that its suppliers in China

followed the same standard as the suppliers in the US and other countries.

Positive Comment

 McDonald’s consistently makes delicious burgers, crispy French fries and icy

shakes, which meet popular demand in China. The menu has been adapted to

include foods tweaked for local tastes and to satisfy customers. McDonald’s

created recipes according to the Chinese taste, which make it more marketable in

China.

New Ideas and Actions

 As a part of the plan, its markets were reorganized and China became a part of

the high growth market. This signified that China had strong growth potential. To

develop these markets, franchising was important as franchising was not well

developed there and there were several opportunities to grow. McDonald’s

planned to grow its share in the informal eating out sectors in these markets. As

part of reorganizing the business.

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Service, Excellence and Workshop

 McDonald’s is good customer service because it is known all over the world for

its fast service and smiling workers. They believe in serving their customers above

anything else. McDonald’s also do regular quality control inspections in stores to

make sure they are taking care of food safety. In addition, their restrooms are kept

clean. Maccas takes care of every single detail to make sure local customers are

looked after.

X. APPENDICES

Appendix A

McDonald in China – Success of a Western Brand in China

 These appendices consist of to gain more patrons; McDonald’s started employing

a new strategy in China. The brand reduced American symbolism in China and

incorporated more menu options with a Chinese twist. As of 2020, there are around

3,300 McDonald’s restaurants in China, 150 thousand employees. By 2017

McDonald’s had served over 1.3 billion customers.

Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig
College of Business, Entrepreneurship, and Accountancy

Appendix B

McDonald's Faces Sales Decline in Asia

 Soon after the issue came to light, China's government issued a ban on import and

sales of products processed by Husi Food Group. As a result of the ban, sales of

McDonald's popular chicken nuggets and chicken fillets were suspended in many

Shanghai branches.

Appendix C

The History of McDonald's in China

 McDonald’s (Màidāngláo) was a late entrant into the foreign fast food industry in

China. KFC, for example, opened in Beijing in 1987, while McDonald’s opened its

first outlet in China only three years later. Unlike KFC who opened its first Chinese

branch in the capital, Beijing, McDonald’s advanced from the south, opening in

Shenzhen, a small city near Hong Kong.

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RIZAL TECHNOLOGICAL UNIVERSITY
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College of Business, Entrepreneurship, and Accountancy

Appendix D

Why McDonald’s Popular in China?

 This appendix consists of variety why McDonald’s is popular in China, because

today China is home to around 800 McDonald’s restaurants. There are

several reasons that McDonald’s is one of the most popular food restaurants in

China because of their great quality foods which the menu has been adapted to

includes foods tweaked for local tastes and to satisfy customers. McDonald’s

created recipes according to the Chinese taste, which make it more marketable in

China. McDonald’s is known all over the world for its fast service and smiling

workers which they have a good customer services. The Chinese McDonald’s

slogan says, ‘Get together at McDonald’s; enjoy the happiness of family life!’

McDonald’s outlets are pleasant fashionable places for get-togethers with your

family and friends. McDonald’s franchise business model has spread

through China by selling franchises which McDonald’s operational capability and

current management has made it a popular investment in China. So far, China is

the number one growth market for McDonald’s outside the USA. McDonald’s is

very popular in China and is the favorite western food for kids and adults. It

offers people affordable prices, good service and delicious flavors.

Republic of the Philippines
RIZAL TECHNOLOGICAL UNIVERSITY
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College of Business, Entrepreneurship, and Accountancy

Appendix E

Why McDonalds' Supplier Failed in China?

 The supplier was exposed by local media for mishandling food in China.

McDonald’s had to ship to these restaurants through alternate product sources.

This took its sources “less than 60 days,” but the company lost significant time and

sales.