Business Practices at MacDonald’s and Starbucks

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Table of Contents

Globalization of McDonalds
Starbucks
Globalization approaches of Starbucks & McDonalds
Bibliography

Originally from California, MacDonald’s was started in 1954. Today, McDonalds is a multinational chain of fast food restaurant (Lee & Yee 2006). The name has its origin from two brothers; Mac and Dick MacDonald, thus the acronym MacDonald’s. Ray Albert Kroc is believed to be the founder of MacDonald’s, opening the first restaurant at Des plains in 1955.

Globalization of McDonalds

All the business enterprises have felt the impact of globalization. Nowhere is this more pronounced that at MacDonald’s, where social, economic and cultural changes have been witnessed. Food has always been viewed art as a cultural commodity, and hence acts to cement social relationships. According to Doreen (2007), the oldest known global carrier of culture is food. When MacDonald’s rolled out its operations in foreign countries as a fast food chain restaurant, this marked the start of the cultural, social, economic and political changes for the restaurant chain.

Kelly (2008) opines that prior to the introduction of MacDonald’s in the overseas market, the fast foods restaurants were rarely in the limelight. As such, MacDonald’s has been viewed at as the first company that helped revolutionarise the global fast food market. Recent studies provide that MacDonald’s currently has more than 1.5 franchises in the United States of America alone (Dutta & Subhadra 2008). In addition, close to half of all its global franchises are outside the United States, in more that 120 countries.

Many customers’ views MacDonald’s as a shift from traditional foods, a move that has since been dabbed as the “Americanization” of diet (Watson 2001). The culture of the globalization of fast foods has appealed to the countries that have been involved in it, as well as their population. Evidently, the culture of the Americans has proved that it transcends a wide range of cultural boundaries. A case in point is the fist restaurant that was opened by MacDonald’s in Kuwait in 1994. On the material opening day, about 15,000 customers are believed to have formed a queue that extended to well over 7 miles (Doreen 2007).

Starbucks

Starbucks had only a single outlet at the pike place market in Seattle. It was only after Howard Schultz came to Starbucks in 1982 that real expansion started, owing to the popularity of the espresso bars he helped start. Ever since its inception, Starbucks has been one lace where quality coffee is to be found, a trend that has continued through the 1990s the present time.

Globalization of Starbucks

Starbucks has always been ambitious through the numerous campaigns that it has undertaken over the years to expand its business operations beyond the United States and North America. Due to this, the company has since been dubbed as globalization flagship by especially the movements that are against globalization (The New York Times release 2008). The ultimate goal of Starbucks is to be the leading coffee brand in each one of its expansion markets. To achieve this, Starbucks ensures that they sell the finest coffee, as well as the other related products.

With over 6,000 outlets in more that 28 countries, the expansion dreams of the company are taking shape. 1,200 of the company’s stores are located internally. The success story of Starbucks in China is worth emulating, and represents an indication of how an international Western company can be in a position to succeed in the face of cultural and political ideologies between, say, the Western countries, and their Eastern counterparts (Vrontis & Kogetsidis 2008). Furthermore, such a country as China, with its huge potential market, have now come to embrace a coffee drinking culture, thanks to starbucks.

Globalization approaches of Starbucks & McDonalds

Cultural environment

In Italy, starbucks has caused a cultural concern as a result of the association that is held by Italians regarding coffee on the one hand, and sidewalk coffee cafes on the other hand. To the Italians, coffee is not just a drink; it forms a part of the life of the Italians (Whan et al 1989). In the United States, it is not unusual to find a customer having a takeaway coffee either on the streets, or in the office. In Italy however, it is the preference of the people to have coffee as they relax and talk with friends.

As such, coffee shops offer a friendly and personalized atmosphere, a trend that the Italians see as a blockade to the expansion of Starbucks in the country (Mitra 2007). Where as starbucks offers a regular formula, a lot of people in Italy prefers to frequent those coffee shops that are somewhat unique. This is a classic example of a negative perception of a concept in globalization, though Starbuck has had immense success elsewhere.

In the book, “the MacDonaldization of society”, Goerge Ritzer has asserts that not only are the fast food principle have a dominant effect on the American society, but on the global community as well (Simcic 2006). According to available statistics, MacDonald’s has been able to expand to over 31,000 restaurants globally. As Ritzer has argued, McDonaldization is the consequence of globalization. He further observes that in the long run, this concept will result in a global uniformity with a profound influence on both the local and foreign traditions and habits (Simcic 2006).

Economic environment

Macdonald has not been spared either by the current credit crunch that has impacted on the economy of the United States, as well as the rest of the world. According to Steve West, who is an analyst with Stifel Nicolaus, the rise in commodity cost, a weakened global market, and the bearish effect of the dollar relative to the international currencies will in the near future prove to be a deterrent to the growth and expansion of the fast food chain restaurant.

As the largest hamburger chain in the world, MacDonald’s has seen a 20 percent growth in earnings for all the last seven quartets but one. The April June quarter, and which is the most recent, has also been featured. The earnings of the company increased by 32 percent to settle at 94 cents for every each item share held (Ori 2006). In addition, sales grew by 4 percent, to hit the $ 6.08 billion mark. Perhaps the only saving grace for the restaurant chain is the fact that their food is cheap, and so in during periods of economic hardship, they are still able to record profits.

In the face of an economic meltdown Starbucks stores were able to record a 3 percent increase in net revenues, to hit the$ 2.5 billion mark for the 2008 fourth quarter (Vrontis & Kogetsidis 2008). At the same time, the share earnings for this quarter stood at $ 0.01, in comparison to 0.21 that had been recorded the previous year, for a similar period. Nevertheless, the company, in July of 2008 made the announcement that it intended to close 60 stores in the United States, 61 in Australia, as well as reduction close to 1,000 jobs in its management structure (Cindy 2006).

Political & Legal Environment

MacDonald’s found itself involved in a number of legal tussles, a majority of which has to do with disputes over trademark. For instance, in 1952, the company sued a café owner in Glasgow, Scotland for using the name McDonald in reference to his café (Gooding 2005). The company has also had to endure a number of defamations over the years. A case in point ifs the McLibel case, in which the fast food restaurant had sued two activists following the actions of distributing pamphlets that attempted to attack health, labor and environmental records (Kamaruddin 2008).

Starbuck too has on a number of occasions been involved in trade dispute. An example of this is a situation that involved three workers of the restaurant who on March 7, 2006 were granted by the labor relation national board $ 2, 000 in unpaid wages. In addition, two of the fired employees’ were also reinstated (Lee & Yee 2006). The previous year (2005), Starbucks had also 8 of its employees paid $ 165,000. These residents of Kent, Washington were being compensated fro against charges that they had previously pressed against their employer for hitting back on them on grounds of supporting their union.

Situational Analysis of the MacDonald case

The use of baristas, offers a personalized attention to the customers. For a majority on the non-Americans, and especially in Italy the taking of coffee is treated as a social occasion, when fiends makes acquaintance with each other (Dutta & Subhadra 2008). For this reason, there is a need to refurbish MacDonald’s outlets to resemble a cozy home. In any case, the customer is the king, and they have voiced their concern on their willingness to pay a premium for coffee, just to get that quality service and acquaintance with the baristas.

In this regard, MacDonald would have to invest in acquiring the bets baristas in the market, to offer quality service to the customer. In addition, there is a need to have spacious and well lit coffee bars, to give room for the customers to read, as they enjoy their cup of coffee. In other markets that competitors like Starbucks have operated in, such as Japan, the local population has embracing a drinking culture, and also shown their need to take their coffee with local snacks.

This should also be the strategy of MacDonald’s; to localize their menu to the habits and traditions of the local communities where their fast food restaurants are based. There should also be a break from the traditional practice of MacDonald’s to have standardized menu. Globalization principles demands that the needs and preferences of a local market be met, in order to realize the overall goal of an organization.

Bibliography

Cindy, Y, 2006, Corporate: “McDonald’s seeks more franchises”, The edge Malaysia.

Doreen, H, 2007, “Burger King builds a worldwide empire: Through careful research and a customized menu, Burger King is expanding its overseas presence”. Sun-Sentinel.

Dutta, S & Subhadra, K, 2008, “Starbucks’ international operations”. Web.

Gooding, M, 2005, ‘The Starbucks corporation: past present and future”, American institute of business management. Web.

Halal market news (2008). Globalization of McDonald’s: Comparative Study Morocco and France, food service research. Web.

Kamaruddin, A, 2008, Consumer Behaviour in Malaysia Travel Marketplace: A Profile of Urban Travel for Senior Citizens, Journal of International Management Studies.

Kelly, Brad, 2008, MacDonald’s still growing fast, but global economy a concern. Investors business daily.

Lee, H. L. & Yee, C, 2006, “building supply chain excellence in emerging economies”. New York: Springer. Web.

Mitra, M, 2007, McDonald’s products cut across age groups, The economic times.

Ori, R, 2006, Lovin’ it or shoving it at McDonald’s, The Jerusalem Post, p. 5.

Simcic, B. P, 2006, “Building corporate brands through community involvement: is it exportable?” Ronald MacDonald House case, Norway. Marketing communication journal, p. 311-320.

The New York Times Release, 2008, Mc Donald’s in Beijing: The Localization of Americana.

Vrontis, D & Kogetsidis, H, 2008, “Environmental analysis as a means to customer satisfaction: the case of Starbucks in Cyprus, International journal for entrepreneurship and business development, vol 3, no. 4, pp. 188-204.

Watson, J, 2001, Golden Arches East: McDonald’s in East Asia.

Whan Park C, Iyer, E. S. & Smith, D. C. 1989, “The Effects of Situational Factors on In-Store Grocery Shopping Behavior: The Role of Store Environment and Time Available for Shopping”. Web.

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