307MKT: There are Clear Signs that the Newly Independent China Arm of McDonald’s Plans: Global Marketing Assignment, CU, Singapore

Coursework Title: McDonald’s goes upmarket in China

There are clear signs that the newly independent China arm of McDonald’s plans to squeeze more revenue out of its stores, even as it seeks to double its store count across China up to 2022.

The company is looking at more healthy options and table service, as well as touchscreen ordering and upgraded delivery services, according to China boss Phyllis Cheung, who said she planned to double the store count 4,500 by 2022 with the bulk of new openings in lower-tier cities. McDonald’s competitiveness in China appeared to receive a boost when a controlling stake in McDonald’s China arm was purchased last year by Chinese state-owned financial conglomerate CITIC.

Healthy dining and food safety will be the “cornerstone”: of McDonald’s future expansion, according to Cheung, who spoke at a ‘McBanquet’ gathering of suppliers and franchisers in Shanghai recently, which featured a talk and demonstrations by chefs and camera-friendly displays of vegetables and fruit arranged at the upscale Waterhouse Hotel on Shanghai’s famous Bund waterfront. Among the healthy shifts planned by Chueng is the use of sunflower and canola oil in McDonald’s restaurants, as well as the introduction of fruit and vegetable servings. Nutritional content will also be listed in-store from January.

McDonald’s China already appeared to be testing the water for more premium products with a major autumn marketing campaign for ‘German-style’ hamburgers sold at RMB17. With two beef burgers and two pork sausages, the hamburgers represent a large premium on single burger hamburgers (RMB7 at Beijing stores). German products are synonymous with quality in China and Germanic origin is frequently a plank of marketing campaigns.

Battleground

Breakfast meat offerings have become a major battleground for fast-food chains in China, particularly as the country urbanizes and first-tier cities shut out traditional street vendors (on food safety, pollution, and gentrification grounds) that are common on Beijing streets.

Breakfast hamburger-egg ‘Mc-Muffin’ sells for RMB14.50 at McDonald’s in Beijing, with coffee and hash browns optional extras. McDonald’s move upmarket appears to be in sync with the Chinese government’s diet plan for 2017-2030 which aims to reduce the number of overweight locals (currently 30% of China’s 1.3 billion population).

Case Study questions:

As a marketing consultant, you have been asked to produce a set of recommendations on the key macro-environmental factors that may influence the success of McDonald’s in China.

You are required to:

1) Use secondary research sources to collect macro-environmental information about China’s market using appropriate academic sources of information.

2) Produce a report that synthesizes the information collected through secondary research and critically evaluate these markets using relevant international marketing theories.

The report should contain a set of recommendations to McDonald’s which identifies opportunities and challenges in the company’s internationalization plan. Justify your recommendations and, where relevant, use examples to support your argument.