370 © Stctegic Management Multi-domestic Strategy of McDonald's France ~ the land of haute enisine, fin ine and cheese ~ would be the ast place you would expect to find a thriving fsefood mater Ina country known for its strong national identity and anti nt, it seems improbable that eae survived the onslaught of French and political activism. In 1999, José Bové, an agricultural unionist, became a hero to anglobalistion ‘Supporters when he and his political group, Confédlération, Paysanne, balllosed a McDonalds on Nise, Tones oe Protest against US trade restrictions on French dairy Products. With bullhorn in hand, he declared to the television news cameras: “We attacked this McDonalds because i is a symbol of multinationals that wane to stuff Uswith junk food and ruin our farmers. In 2004, amid che nutritional conttoversy sparked by Morgan Sputlock’ documentary Supersize Me, MeDonald’s as declared in French media to be the epitome of malboulfe or “junk food” and deemed parly to blame for the nation’s rising obesity rate. slobalisation movemen McDonald's could have McDonald's: A Brief Profile MeDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants, serving around 68 nillion customers daily in 119 countries, Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald in 1948. ‘They reorganised their business as 2 hamburger stand using. production line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth. A McDonald’ restaurant is operated by either franchisee, an affiliate or the corporation itself. The corporation’ revenues come from the rent, reyaltiesand fees paid by the franchisees, aswell assalesin company-operared restaurants. McDonald’ revenues grew 27 percent over the three years ending in 2007 to $22.8 billion, and 9 percent growth in operating income to $3.9 billion, McDonald’ primarily sells hamburgers, cheeseburgers, chicken, French fries, breakfast items, soft drinks, shakes and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, wraps, smoothies and fruit. McDonald's, the world’s largest fastfood corporation, with a global presence in 123 countries across all six inhabited continents, has turned the home of Le Cordon cooking academies and the Michelin Guide of world- renowned restaurants into its second-most profitable matket in the world. The chain has more than 1,200 restaurants in France ~ al locally owned franchises — and 4 growth rate of 30 restaurants per year in the past five years alone. What is at che heatt of this impressive growth that has stunned French observers and surprised business analysts? The theee main reasons for McDonalds success are local responsiveness, rebranding and a robust corporate ecosystem (Lutey Fancourt, Bredesen Lewis and Nicholas Majka, January 03, 2012 in Knowledge@Wharron).. Local Responsiveness Burger King — arguably McDonald's largest competicor in theworl entered he Pench atkevin 1981 but closed 239 store in 1997. Its strategy of directly teansplanting the ‘American restaurants, with no local adaptation, resulted in ‘weak sales, A French hotel and restaurant journal remarked a the time of the brand’ closing thae ‘Burger King faced zo significanc handicap against its rivals, McDonald's and Quick. Despite the three companies entering the French market around the same time, McDonald's has grown to 542 restaurants and Quick {to} 258." To put Burger King’s failure into context, from 1983 t0 1996, the French fast- food marker grew by neatly 1,450 restaurants, and total market value increased fivefold. The different growth trajectory of McDonald’ France is largely ateributed to the age-old American adage, slightly refined: The customer — the French customer, to be exact ~ is king. At every euro, the management of McDonald's France has been sensitive to the preferences of French consumers, both inside the restaurants and in their daily lives Since opening its frst French restaurant in Strasbourg in 1979, MeDonald’s has sought co leverage the strength of the global conglomerate while tailoring its menu to the French palate. Although some elements ofan international strategy were apparent in McDonald's French entry, overall the chain was not responding to local market needs and ‘opportunities. Strasbourg was chosen as che initial location in order to leverage the brand recognition that already existed in Germany, while keeping the same restaurant décor and recipes for France, According to Nawal Trabelsi senior VP for McDonald's France and Southern Europe, “For the first 15 years, from 1980, what we did above all was offer people a slice of America.’ However, in 1995, . MeDonald’s starred using French cheeses such as chevre, cantal and blue, as well as whole-grain French mustard =| By changing 7 recipes in France, McDonald's started executing a multidomestic strategy and winning the hearts of French consumers - : Contd...‘MeDonald’s also demonstrated the power of understanding the cultural particularities of consumers across national ‘boundaries. In France, barely 10% of meals are eaten outside the home, compared to nearly 40% in the US and the UK. Unlike their Anglo-Saxon counterparts, French consumers rarely snack berween breakfit, Iunch and dinner, Asa result, French meal times also last longet, and ‘more food is consumed through multiple courses, creating unique opportunities and challenges for fast-food dining McDonald's decided to capitalise on the opportunity. Rather than run promotions chat encourage snacking, the company freed up valuable labour by installing electronic ‘ordering kiosks, which are used by one out of every three ‘more than 800 ofits restaurants. McDonalds om the French cultural preference for longer meals by using surplus labour to provide cble-side service, particularly in taking orders from lingering diners inclined to a an additional coffee or dessert item. Thanks to such insiatives, che average French consumer spen UUSEI5 pr vie wo MeDonalls~ four ume cae American counterparts spend, Moreover, to solve the issue of empty tables during non- meal times, McDonald's introduced McCafé in France ~ a range of high-end coffees and pasties available from 4 separate counter. McCafé pastries come from the Holder Group, a baking conglomerate that operates the popular Paul and luxury Ladurée brand stores in France According to McDonalds France chief of stall Alexis Lemoine, ‘I set up taste tests for my friends between ‘MeDonaldl’s macaroons and those of Ladurée, andl almost .’ This unorthodox move no one can tel the differen from the most traditional purveyor of burgers and fies, not only increased revenues by 5%, by adding, products with over 8096 profit margins but aso contributed to the embourgeoisement (gentrification) of the chain’ image Tn August 2011, McDonalds announced that the MeCafé would be taking on another ubiquitous French food icon the baguette bread roll (which will also be supplied by the Holder group). By baking the baguettes in-house and ‘offering them both as a breakfast item and in the form cof baguette sandwiches, McDonald’ is clearly making 2 play for the non-anchised 'ist-food’ segment currently ‘occupied by the tens of thousands of bakeries across France. ‘According to a 2008 study by French resaurant industry consulting firm, Gira Conseil, the French consume nine times mote traditional sandwiches than hamburgers, and more than 70% of all sandwiches consumed in France fire made on baguettes. As McDonald’ Trabelsi notes, “Today, we are pare of French daily life. Our priority is ro integrate locally while offering our tational products. “The French are passionate about bread and crazy about braguetes, Were gradually esponding toa maura demand. ‘As a response to the growing teen for healthy eating in France, McDonakt introduced the MeSalad. The new egy Implementation: Struc Lsues 5p, (Chapter 12 concept store, designed and implemented by McDonald, France asanall-salad restaurant, isthe fist ofthe company’, 37,000«"gloal retaurans where customers will not find any ofthe tational burgers, fies or shakes. Situated in dhe heare of La Défense, Pariss massive corporate office park, the McSaad is argred atthe upscale cliencle of the areds 200,000 daily business workers who can place their orders online from their desks to maximise their short fnch breaks. According 0 Elizabeth Rosenthal, « New ‘York Times contributor and researcher on food trends, the French spent an average of 38 minutes per meal in 2005, down fiom an average of 82 minutes in 1978. Fireplaces and Flatscreen TVs “The second major success factor could be headlined ‘progressive marketing’ Perhaps the most striking aspect about McDonald’ restaurants in France is not found on the menu ~ it is the restaurants themselves. McDonalds franchisees have invested heavily in eheir ambiance and spent approximately US$5 billion in renovations in less than a decade. The most noticeable innovation has been the refinement of the restaurant interiors to create 2 welcoming environment where customers linger ~ a stark departure from the American restaurant strategy €0 minimise customer visting time and maximise purchasing tumover. Sleek, madera tables with plush, comforable went chairs and high-impact wall graphics are more re of Starbucks than a traditional fast-food chain. Ourside, the store’ visual profile and signage are so subdued as bbe practically invisible o passers-by until customers are directly in front of the restaurant itself. This contrasts secongly with the chain style of buildings in the US, where the lighted golden arches logo is hoisted high in the air in order to be seen from a distance. Far from the homogenous design layouts throughout the US, French franchise owners have opted for tseful, diverse and regionally appropriate restaurants. McDonald's Alexis Lemoine notes that, even within Paris, restaurans varied tremendously according to target demographics. In 2005, free WiFi was implemented in all McDonald's restaurants in France ~ a move not followed by their US compatriots until 2010. “This strategic shift in the fast-food business model has nor gone unnoticed by other global subsidiaries. In Seprember 2011, McDonald's Canada appeared to follow the French lead and announced its own SI billion 1,400-ore overhaul. In explaining the decision co transform the tradicional restaurant layout into sleck stone-and-wood interiors ~ complete with free wifi fireplaces and Ratscren “TVs— McDonald's Canada CEO John Betts notes, ‘People tend to linger a lee bic more in restaurants today. They want to enjoy their meals and take a break from the busy lifes cha they lead. We think our restaurants coday ae certainly doing tha alr beter than inthe past.” Cone.372 © Suategic Management In trying to appeal to the modern Fe ‘MeDonald’s has also pushed eo piblicie the ‘greening’ of its image. In France, the golden arches are not surrounded by the familiar red background, but by a forest green colour, Although initially controversial with the head US office, this branding has already been Followed by several of its European subsidiaries. Furthermore, MeDonalil’ advertises that it aims to reduce gas emissions by more than 50% over the next 10 years and already recycles 7,000 tonnes of frying ol ro be used as bio-diesel fucl. Steps have yet to be taken to recycle the many tonnes of paper and plastic produced in-store, Lemoine claims it has prover. ‘too difficult’, but it clearly seems a logical nen step for the ‘green’ company to take. ich restaurant goer, les Inline with the strategy of redefining tsimage, MeDon reviewed its reputation for unhealthy food. Jean-Pierre Petit, the CEO of MeDonald’s France, pu his decades of marketing skills © good use. Although not required, ‘nutritional and caloric information were aided co ll food packaging, Other health-fiendly feaures of MeDonald’ France include reducing sale on french fries, fresh fruit packets (introduced in 2007), and ‘le Big Mac’ with a ‘whole-wheat-bun option. Alvhough the lion's share of McDonald’ revenue will continue to be buigers and fries, the company has taken steps to show that iis commieted to healthy cating and using French fre Suppliers as Partners Pethaps the greatest strength of McDonald’ France addition to its uncanoy ability co predict French consumer preferences, is its ability 10 redefine the American model that has worked so well in the US. McDonald’ France hnas created an entire ecosystem that has been critical to its current succes. After the José Bové bulldozer incident, McDonalds France introduced ad campaigns © tll customers more about itself where it came from, what ingredient ie used, and who ic employed, just how French it had actually become. Ic hen strengthened tics to French agribusiness, advertising widely chat 95% of the company’s ingredients come from France, with che rest coming from the European Union. McDonald’ is today the number-one purchaser of beef in France. ‘We know where every hamburger and chicken nugget came from,’ notes Lemoine, "We can trace chem thin one day’ This also allowed for some se panic to the farm advantages during the mid-1990s' ‘mad cow (Bovine spongiform encephalopathy). ‘Our con had to cut out all beef production. We were so confident we knew our farms that we continued producing and gained market share.” Moreover, although McLJonald’s sources 95% of its produce in France, very few of its suppliers have formal the chain, Inscead, they are seen as partners to McDonald, “McDonald's Cannot afford co have supply issues preventing it fom Saling Big Macs,’ Lemoine says but che large capital Javeniment thac suppliers make to provide products makes ly dependent on Big, Mac sales, creating a sore ween supplier and the restaurant. contracts with whose success is symbiotic them e4 of interdependence bet nported through programs to give them puacticula qualifications, such as nationally recognised ploras and cerifaiony and in tury emploss regularly have been found supporting McDonald's anc Frater is brand on Inernet forums and blogs. MeDonald’ leverages its franchises and their proximity to customers by ensuring that 20 elected franchisee representatives vote on every marketing campaign and product launch before they are impleménted. French Ulctors were consulted when discussing how to improve MeDonald’s nutritional content, and Greenpeace was engaged to discuss its environmental strategy. In their book, The Soul of the Corporation, Hamid Bouchikhi, a professor at ESSEC business school in France, and John Kimberly, a professor at Wharton, examine the challenge of both corporate and national identity in multinational corporations. Ask any French person the ‘nationalisy’ of McDonald’, and he or she will most cercainly say it is an American brand. However, {9596 of all McDonald’s France products are sourced from French farms. The company’s management, employees and franchisees are 100% French and operate nearly uconomously from the US parent organisation. Ies menut items, designed by French chefs and fearuring regional specialties, such as Roquefort cheese sandwiches and Parisian macaroons, are found nowhere else in its global neowork of restaurants Can MeDonall’s France still be considered an ‘American! company? Can its unique French characteristics explain its success there? Although McDonald's France leverages the power of the global network ~ contributing to, and benefiting from the brand and innovation, ic has redefined itself as a French company that is constantly looking to adapt to che needs and preferences ofthe French culture. Employees ares Discussion Questions 1. Comment on the multidomestic strategy followed by McDonald’ in France? According to you, the company has.made the right moves o far? Why or why not? 2. Is it possible for the company to pu this strategy ico practice in other countries, too? Why or why not? Provide reasons. oe