Apr 20, 2009
McDonalds has expanded to international markets in the face of increasing regulations in the United States and domestic market saturation. They initially entered international markets by leveraging standardized product offerings, clean and bright environments, and American brand equity. However, recent years have seen McDonalds adapt to local regions by remodeling its retail space while changing the product line to appeal to local tastes. While the strategy has paid off well in the short term and McDonalds has realized that they must adapt to each country they enter, their tactics of both catering to local tastes and changing the restaurant’s design and appeal is diluting brand equity. This will have disastrous consequences in the long term.
“The Golden Arches” have become synonymous with not just fast food but also American culture in foreign countries (sad, but true). By adapting the food offerings to local tastes, McDonald’s risks losing its connection with American culture. According to Business Week:
If you don’t fancy a Big Mac in the branch at the Piazza di Spagna in Rome, you can order pasta freshly cooked to order. In France, McDonald’s serves wine and runs an annual promotion called Le Saga du Fromage, where instead of the usual cheddar, burgers are topped with beloved French cheeses such as Reblochon. – Business Week
This reduces the appeal McDonalds leveraged when initially entering. Ultimately, consumers in foreign countries have a number of choices for local foods while McDonalds is among the few places to have traditionally American fast food. Still, McDonalds may be able to cater to local tastes as long as it focuses on its core competency of fast food.
In Europe, unfortunately, McDonalds is straying from its fast food roots. In an effort to compete with coffee shops like Starbucks, McDonald’s is turning the restaurant space more upscale and comfortable, while offering healthier and more locally palatable foods. They are also offering Wi-Fi and rental iPods. However, this strategy not only dilutes the brand equity by adapting to local tastes, but also moves McDonalds even further away from its core competency of fast food. With Wi-Fi and music, who needs their food served fast? Europeans no longer expect American food from McDonalds, nor can they expect a fast food environment. While this may be profitable to regain lost market share in the short run, it is a dangerous strategy in the long run.
By tailoring the restaurant space and product offerings locally, McDonalds is actually moving away from the development of a truly global brand. It is clear that McDonalds’ adaptation tactics are diluting its brand equity and straying from its core competency. As the company continues to expand, they will have a hard time creating a global brand because the McDonalds’ dining experience will be radically different from country to country. If they continue this strategy, they will have a hard time remaining a globally meaningful and recognizable brand.
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