McDonald's in China

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Case Details:

Case Code : BSTR305
Case Length : 20 Pages
Period : 1998-2008
Pub Date : 2009
Teaching Note : Available
Organization : McDonald's Corporation
Industry : Fast Food Industry
Countries : China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

According to the report, Asia/Pacific, the Middle East, and Africa (APMEA) contributed to 16 percent of the company's total revenues, half of which was from Australia, China, and Japan collectively. China was one of the key markets for McDonald's as it contributed significantly to the company's revenue and operational income.

McDonald's entered China in 1990 with its first restaurant in Shenzhen⁸. Since then it began to expand steadily in the country. For McDonald's other than its home market - the US, China was the largest growth market with 960 restaurants and over 60,000 employees as of 2008.

In China, McDonald's became a symbol of modern lifestyle. Though it remained American in terms of menu, services, and management, the company brought in variations in its products and ingredients to suit the Chinese palate and culture.

McDonald's strategic plan in China was to focus on core menu extensions, convenience, and value. The company planned to open 125 restaurants in 2008, 150 in 2009, and 175 in 2010 across China with the focus on drive-thru restaurants and round the clock service restaurants.

In China, McDonald's biggest competitor was Yum! Brands Inc.⁹ (Yum Brands) that operated Kentucky Fried Chicken (KFC), Pizza Hut, and Taco Bell restaurants.

McDonald's also had competition from local fast food restaurants. The bird flu¹⁰ and SARS¹¹ epidemics threw up a tough challenge for McDonald's - food safety...

Excerpts >>

8] Shenzhen is located in the southern portion of the Guangdong Province, near Hong Kong.
9] Yum! Brands, Inc., based in Louisville, Kentucky, is one of the largest restaurant companies in the world with more than 35,000 restaurants across 110 countries as of 2008. Four of its brands Kentucky Fried Chicken (KFC), Long John Silver's, Pizza Hut, and Taco Bell are the global leaders in the fast food industry. KFC is a chain of fast food restaurants which offer fried chicken served in various forms as their speciality. Long John Silver's is a fast food restaurant that specializes in seafood and fish and chips. Pizza Hut is a pizza restaurant chain offering different styles of pizza along with side dishes including pasta, breadsticks, garlic bread, etc. Taco Bell is a restaurant chain specializing in Mexican fast food.
10] Bird flu referred to as Avian Influenza, is an infectious disease of birds caused by type A strains of the influenza virus. The infection can spread from domestic poultry to humans and can even cause death in humans.
11] Severe Acute Respiratory Syndrome (SARS) is a respiratory disease in humans which is caused by the SARS coronavirus

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