When you think of fast food, McDonald's is likely one of the first names that come to mind. The iconic chain has become a global phenomenon, and its expansion into China has been no exception.
However, the success of McDonald's in China did not come easily. The company had to adapt to the unique tastes and preferences of Chinese consumers, as well as navigate a highly competitive market. Despite these challenges, McDonald's has managed to establish itself as one of the most popular fast food chains in China, with a loyal following and a strong presence across the country.
Source:- https://www.businessinsider.in/retail/news/mcdonalds-reportedly-suspends-business-in-five-chinese-cities-as-the-coronavirus-death-toll-continues-to-rise/articleshow/73584379.cms
McDonald's opted to enter China as part of its worldwide growth after seeing the enormous potential of the Chinese market. It makes sense to expand. Yum China, a larger rival that runs Pizza Hut and KFC, has more than 7,000 locations presently and anticipates eventually expanding to 20,000.
It demonstrates how Western fast food still has room to develop, especially in China's less glitzy third- and fourth-tier cities. McDonald's China CEO Phyllis Cheung stated in September that the business would open about 480 new locations in 2020, 660 in 2021, and 700 in 2022. The fast food giant said it has plans to open 1,900 new restaurants in 2023. Chinese state-backed Citic Ltd., Citic Capital, and American private equity company Carlyle Group Inc. purchased ownership of the fast food chain's mainland China and Hong Kong businesses from McDonald's Corp.
In 2017, Mc Donald's was valued at as much as $2.1 billion. The business now has more than 4,500 eateries in Hong Kong and mainland China, with plenty of space for expansion. But, there have been challenges along the road, such as Covid-19 lockdowns, concerns about food safety, and rivalry from rivals whose menus maybe more suited to Chinese consumers. By the number of stores, China is McDonald's second-largest market after the United States.
Market share of McDonald’s in China over the years
Source:- Statista
To advertise the inauguration of its first carbon-free restaurant in Beijing, the fast-food juggernaut has launched several marketing initiatives. To reach zero carbon emissions by 2050, McDonald's China has pledged to establish 1,800 green restaurants nationwide by the end of the year .The green restaurant is powered by more than 2,000 square meters of on-site solar panels. The marketing attempts to give customers environmentally friendly experiences to promote the advantages of a low-carbon way of living.
The promotions include free meals for patrons who use a navigation app and go to restaurants on foot or by bicycle as well as discounts on sustainable menu items like Filet-O-Fish, which utilizes exclusively cod that has been certified by the Marine Stewardship Council. The green initiative of McDonald's China is in line with the brand's worldwide objective to implement more environmentally friendly, sustainable practices and produce no carbon emissions by 2050. Also, it is a big strategic step for McDonald’s which is now ranked second in the
market to market leader KFC.
To guarantee the caliber and uniformity of the food at all of its locations throughout China, McDonald's has standardized operations in all parts of China. To set itself apart from the lesser local players, McDonald's was always cautious to localize the menu only to a certain level.
A variation of the "Dollar Menu" called the "Value menu" which featured sandwiches and other things at
a reduced price was introduced in China. It also created a scaled-down version of the "Value Meal" that cost twenty cents and included little fries and a small drink.
McDonald's has promoted itself in China using a variety of strategies, including meal packaging that was influenced by local video games. Even the Chinese name for hamburgers is intriguing. When we take a look at the Chinese translation of the term hamburger (hànbǎo), the first character used might be rendered as "China" or "Chinese," which would reflect a particular connectedness to Chinese culture.
To further engage China's young, wealthy consumers, the company is expanding its McCafe concept across the nation. By the end of 2023, McDonald's intends to introduce the coffee idea in 1,000 additional stores to take on Starbucks and the regional coffee juggernaut Luckin Coffee.
Due to its extensive history, China features several distinctive traditional holidays that are absent from other nations. At the same time, McDonald's has introduced several "festival-limited" items based on customer mental demands and those unique Chinese festival customs since Chinese people have a distinct matching sensation for various Chinese traditional holidays. McDonald's impact in the Chinese market is efficiently and consistently increased by seasonal items. For instance, McDonald's began posting brief advertising videos on social media before the Spring Festival started in 2016. The advertising slogans centered on "train tickets", "Spring Festival Gala", "Red Envelopes" and other Spring themes that are connected with Chinese culture.
The exceptional quality of McDonald's was one of the primary factors contributing to its success in China. The immaculate dining rooms and kitchen, the fresh ingredients, the stringent quality control, the high standards, etc. had all received extensive coverage in Chinese media. The media praised its standardized food manufacturing processes, recipes, and cutting-edge management strategies. McDonald's underlined several times that its Chinese suppliers adhered to the same standards as those in the US and other nations. The business guaranteed quality by paying unexpected visits to its suppliers to see if they were abiding by the standards.
Source:- https://www.nytimes.com/2017/01/09/business/dealbook/mcdonalds-china-citic-carlyle.html
However, the Covid-19 Pandemic was one of the toughest challenges that were faced by the company but they tackled it with some initiatives. While the the nation maintains its zero-tolerance attitude to combating Covid-19, the operator of McDonald's restaurants in China has secured almost $2 billion in bank loans to free up cash that will assist operate the business, according to individuals familiar with the situation. For the past two years, McDonald's China's delivery services have expanded despite intermittent lockdowns on the mainland. Now, the shipping business accounts for around 30% of its overall sales.
KFC has maintained its dominance in the market by making use of its first-mover advantage (it was the first American fast-food chain to debut in China) and a menu that has been tailored to Chinese preferences (it offers congee, egg tarts, and pork). KFC with a market share of 11.6% in 2020 as opposed to McDonald's 5.6% and has 5,200 locations compared to McDonald’s 2,500. McDonald's comes in a close second but hasn't been able to match the brand loyalty KFC has in China. One effective tactic to increase its popularity is to change the way it markets its environmental credentials and targets youthful consumers.
Nonetheless, the new speed can be difficult. Since 1990, McDonald's has been required to build 2,500 outlets. It will need to quickly identify a large number of suitable locations and employ a sizable workforce. It will be challenging to maintain food safety and quality control while scaling up so fast, and this will strain suppliers.
As McDonald's continues to expand in China, it's clear that the chain has found a way to cater to the local tastes and preferences while still staying true to its American roots. And who can blame them? Where else can you enjoy a burger, fries, and a milkshake all under one roof? From menu items like the McSpicy chicken sandwich to localized marketing campaigns, McDonald's has made a concerted effort to connect with Chinese consumers on a personal level. And while the company has faced its fair share of challenges along the way, its success in China is a true testament to the power of persistence, innovation, and a little bit of luck.
Article by:- Shashank Subramani
Edited by:- J Shree Nidhi
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