I

McDonald’s Secret Formula:

Can McDonalds’ business model be replicated by other organizations?

Patrick J. Carpinelli

patrickcarpinelli@yahoo.com

INST 4999: Senior Capstone Seminar

May 7, 2021
 II

Abstract: McDonald’s business model emphasizes a focus on cost, speed, and consistency.

However, it is their attention towards cultural literacy and the application of this literacy that

promotes their domestic as well as global dominance. It is widely known that McDonalds is

one of the foremost experts of both strategy formulation and implementation based on aspects

of individual countries’ cultures. Given McDonald’s track record, specifically internationally,

an in depth analysis of McDonald’s ventures outside their domestic market is explored. This

study will explore McDonald’s strategy formulation and implementation with regard to their

operations in both India and China in the context of approaches to intercultural competence

from Frons Trompenaars and Edward T. Hall. This study poses the question of whether or not

McDonald’s “secret recipe” for success can be replicated to deliver other companies similar

international success.

Author Biography: Patrick Carpinelli is a senior at Fairfield University studying International

Business and Business Law, Regulation, and Ethics. He is a New Jersey native with interests in

Marketing, Consumer Insights, Market Research, and Cultural Anthropology.

 III

Table of Contents

1. Title page

2. Abstract and Author Biography

3. Table of Contents

4. Introduction

5. What is Culture

6. The 7 Dimensions of Culture

a. Trompenaars 7 dimensions model

b. Edward T. Hall’s context model

7. Application of Trompenaars’s Model to McDonald’s

a. Menu

b. Promotion

c. Trademarks

d. Restaurants

e. Employees

f. Service

g. External Analysis

8. Conclusion

9. Bibliography
 1

Introduction

The world is more interconnected in 2021 than at any other time in human history. With

such unprecedented levels of globalization comes extensive exchanges of language, technology,

ideas, culture, and so on. Part of this interconnection comes in the form of private enterprises

expanding past their culturally homogenous society and entering markets that may speak a

different language, hold differing religious beliefs, have different forms of currency (if they have

currency at all), etc. This paper will examine the theory that the ability to understand, and more

importantly, adapt to the cultural differences that foreign market’s embody (independent

variable) is a major determinant of high market share (dependent variable). To test this claim,

this study will apply Frons Trompenaars’ cultural dimensions model in order to study how

McDonald’s menu, promotional, trademark, restaurant, employee, and service adaptations relate

to Trompenaars model. Furthermore, the question of whether or not McDonald’s adaptation

business model can and/or should be replicated by other businesses will be answered.

What Is Culture?

McDonald’s has the highest market share of any fast food company in the world at

around 21 percent (Fast Food Market Share 2021) and with locations in more than 100

countries, understanding the cultural factors as well as the risks and opportunities of operating a

business in each region, country, and culture is undoubtably on the mind of the company. In

order to determine if McDonald’s adaptations (menu, promotional, trademark, restaurant,

employee, and service) are the key reason for this success, it is important to understand what

variables make up a culture. Complex culture is an aspect of human life that separates us from all

other living things on Earth. While many animals exhibit signs of learning, it is the ability to

accumulate culture and build upon it though teaching that has elevated homo sapiens to the level
 2

of dominance that is clear in one’s everyday life (the food humans eat, the homes we live in, etc.)

(Rutherford 2018). In the twenty-first century, culture is prevalent in everyone’s life,

simultaneously affecting and being affected by every individual despite not always being evident

on an individual level. Globalization has been at the heart of human progress, however it has also

led to conflict and disconnect due to a lack of intercultural competence. Without a proper

understanding of another’s culture, individuals, corporations, and even nations may fail to

effectively communicate, market, sell, and sell to others with differing cultural values, norms,

beliefs, and so on. If one's culture is an ever changing maze, having knowledge of its general

structure, or better yet, a map of its constantly evolving layout would prove invaluable. Several

prominent theorists, including Frons Trompenaars and Edward T. Hall have attempted to build

this coveted map.

The Seven Dimensions of Culture

Trompenaars’ findings, dubbed the “Cultural Dimensions Model” (Barker 2020) outlines

what Trompenaars found to be seven scales on which individuals’ collective culture is made up:

universalism versus particularism, individualism versus collectivism, achievement versus

ascription, specific versus diffuse, neutral versus emotional, sequential time versus synchronic

time, and internal direction versus outer direction (The Seven Dimensions Of Culture 2021).

These seven dimensions measure cultures on a range of categories that together form what we

define as culture.

Universalism versus particularism is the first scale of Trompenaars’ seven cultural

dimensions model. It measures where a culture stands in relation to the two extremes of the

range (universalist beliefs and particularistic beliefs). For explanation, individuals who display

universalistic views tend to believe that what is ethical/just is definable and that their actions or
 3

lack of action should be enacted in all circumstances and without consideration for external

factors (Trompenaars 1994). This is similar to Emanual Kant’s categorical imperative. On the

other side of the spectrum, individuals who are considered particularistic believe that

circumstances and conditions (often relationships) play a role in the decision making process,

similar to consequentialism. Trompenaars believes that through understanding the appropriate

placement of a culture in the range of these two extremes, it allows a business to better address

aspects of both the front end and back-end of business operations. To give an example, employee

and client contracts may be handled differently depending on whether or not a culture is

considered universalist or particularistic (Trompenaars 1994).

The second range within Trompenaars cultural dimensions model addresses a culture’s

tendency to favor individualist ideas or collectivist ideas. To expand on this idea, the concept of

individualism implies a focus on one’s self over others, whereas collectivism flaunts a preference

towards common objectives and goals (Barker 2021). The level at which a culture collectively

adheres to either individualist or collectivist ideas is rooted in the level of belief that people are

part of a group or identifies as an individual. Countries such as Canada, USA, and Norway are

stark individualists, whereas countries like China, Egypt, and France generally possess

collectivist beliefs (Trompenaars 1994). This dimension of culture is important to cultural

competence as a whole; aspects of business such as efficient incentives and motivation,

employee representation, and so on are all in some way affected by the culture’s individualist or

collectivist tendencies (Trompenaars 1994).

How humans share information among themselves arguably plays just as important a role

as what they communicate. The level at which a culture is neutral or emotional when

communicating is another metric of Trompenaars’ cultural dimensions model. Neutrality as it

 4

pertains to emotion does not necessarily mean individuals in that society “feel” more or less than

another culture, but that its expression is controlled, and maybe even repressed (Barker 2020 ).

On the other end of the spectrum, cultures that exhibit emotional tendencies are more expressive

of their emotions. It’s important to stress that neither of the two extremes is “better” or “worse”

but instead are two opposing themes with various implications. For one, humor, irony, sarcasm,

and other forms of joking are not often met with the intended laugh in neutral societies such as

Japan or Germany; however, this does not mean that one culture is “funnier than another”.

Similarly, verbal as well as nonverbal communication is another key byproduct of the

neutral/emotional dimension of culture. The well-known saying “it’s not what you said but it’s

how you said it'' has some relevance when describing the basis for a culture’s emotional

neutrality or expressiveness when communicating. Along with the actual verbal communication

(where a majority of information is conveyed through words), the tone of voice as well as

nonverbal communication (eye contact, positioning, body language, and so on) are aspects of life

that are included in Trompenaars neutral versus emotional dimension (Trompenaars 1994).

Edward T. Hall developed a similar categorization of culture to that of Trompenaars’s

neutral versus emotional dimension. Hall's context model, introduced in his 1976 book Beyond

Culture, separates cultures into being either high context or a low context cultures based on,

among other things, the culture’s communication habits. (Hall 1976). As Hall puts it, high

context cultures are defined by transactions containing features of pre-programmed information

that the issuer and receiver both have as well as in the setting in which the communication is

taking place, with only a small amount of information contained in the transmitted verbal

message, and the opposite being true of low context cultures (Hall 1976). The presence of both

context and information is crucial to conversational meaning; without either implicit or explicit
 5

elements, conversation loses its meaning (Kittler, Rygl, and Mackinnon 2011). Examples of low

context cultures include Anglos, Germanic and Scandinavian, while Japanese, Arab and French

cultures are considered high context cultures (Rutledge 2011). A visual representation of these

and further cultures is visible in figures 1 and 2. Both Trompenaars and Hall evaluate a culture

based on the features of its communication, however Hall’s context dimension infers an explicit

relationship between communication and culture that is absent in Trompenaars’s. As will

become evident later in the paper, McDonald’s takes into consideration both of the models put

forth by Trompenaars and Hall when doing business in counties such as China.

Figure 1: A Visual Representation of the range of Cultural Dimensions by country

 6

Figure 2: A Visual Representation of the range of Cultural Context

The level(s) at which individuals of a society engage with each other determines where a

society falls in Trompenaars’ fourth dimension of culture: specific versus diffuse. If individuals

of a culture maintain significant distance between life spaces, it would be considered a diffuse

culture. For example, in countries like those in the Middle East, China, and Japan, an

individual’s work and private life are closely intertwined, whereas in specific cultured, the roles

of work and that of private life are segregated. Multinational companies that are able to apply

this dimension of culture into their business operations gain an advantage, as many aspects of

both the customer facing part of operations (i.e. advertising, social media etc.) as well as the

business facing operations (i.e. management) involve this aspect of culture to some degree.

McDonald’s keeps this dimension in mind when operating abroad, as will become evident later

on.

Achievement versus ascription describes how a culture evaluates and assigns an

individual status. Achievement based cultures assign status based on how well an individual
 7

fulfills their role in society (their function). On the other of the spectrum, status/importance in

ascription based cultures is given based on naturally invoked roles (elderly, males, and so on)

(The Seven Dimensions Of Culture 2021). An adept comparison would be status is either rooted

in ones actions (achievement) or who an individual “is” (ascription) (Trompenaars 1994). The

implications of this dimension of culture extend in several directions. For one, the role of rank

and title in the eyes of one culture compared to another varies; achievement cultures assign value

due to one's rank in a company, government, armed service branch, etc. while ascription based

cultures may not. Furthermore, ones rank within a company for example may not be viewed as

equally as important for ascriptive thinking individuals compared to that of achievement centric

individuals. For instance, a representative of a company based in an achievement oriented

culture, although having reasonable authority to speak on behalf of the company, may not be

seen as having proper authority since they are not at the metaphorical helm of the organization;

this would be categorized as being in the back-end of business operations. Companies such as

McDonald’s might utilize this dimension in front end operations as well and will be examined

further.

The sixth dimension of culture as put forth by Trompenaars measures a culture’s

relationship with time; this is determined by whether a culture views time as sequential or

synchronic. Cultures that view time as sequential often have stricter measures of time and treat it

as a commodity, living by the minute, hour, day, quarter, etc. Synchronic cultures on the other

hand depict time as continuous, believing that the past, present, and future are

interconnected. How a culture views time is vital to many aspects of business; punctuality for

sequential cultures, for instance, is seen as important and showing up late is frowned upon. The

concept of punctuality for synchronic cultures, while still important, is viewed less strictly than
 8

in sequential cultures (Trompenaars 1994). This is relevant to McDonald’s and other fast food

companies in many ways, two of which are in the management of employees (i.e. in a 40 hour

work week) as well as in the time available for customers to eat. For a fast food business for

example, a culture that leans towards sequential time management (U.S.A.) often eats their meals

very quickly and leaves the establishment shortly after finishing, whereas in synchronous

cultures (France), patrons take their time eating and on average spend more time in the

restaurant.

The last of Trompenaars seven dimensions of culture is internal direction versus outer

direction. In essence, how one interacts with their environment is the basis for this dimension. If

individuals in a culture believe that they are part of their environment and that they have to go

along with what their environment imposes on them, that culture would be considered as an outer

direction culture by Trompenaars. Internal direction on the other hand is categorized by

Trompenaars as believing they control their surroundings and therefore seek to change their

environment. This factor of culture has major implications for businesses, including motivation

and success of its employees based on their locus of control to name one (Trompenaars 138).

This is relevant to McDonald’s in a variety of ways, one of which is through conflict resolution,

both internally and in the public eye. An instance of McDonald’s understanding this cultural

dimension will be presented further on in the paper.

It is important to note that the intended application of Trompenaars seven

dimensions of culture model is to help improve managerial cohesion for companies employing

internationally and not to gage consumers’ preferences, beliefs, tendencies, and other cultural

factors. For the purpose of this examination however, the use of Trompenaars’ model has been

used to analyze where consumer’s cultures lie on the scales he put forth.
 9

Application of Trompenaars’s Model to McDonald’s

The ability for a company to understand the cultural underpinnings of the market(s) they

operate in is emerging as being crucial to achieving high market share. This is especially true for

multinational businesses, as cultures outside their native market often vary drastically in one or

more dimensions. Therefore, having low intercultural competence or not putting in cultural due

diligence can lead to low market share or even complete failure of that business. Home Depot,

one of seemingly countless multinationals that have maintained low market share or failed when

expanding their business operation abroad, did not clear the cultural hurdles of China when

entering the Chinese market in 2006. Home Depot failed to, among other things, grasp that

Chinese culture did not possess the same “do it yourself” (DIY) attitude that was present in their

home market (Gao 2013).Furthermore, a majority of Chinese live in condominiums that do not

have garages or much extra space to store tools, wood, or other products that Home Depot sells.

On top of this, the price of labor was low, supporting the preference of hiring someone to do a

job rather than buying the needed goods and doing the project themselves (Gao 2013). With less

than sufficient demand for DIY goods (tools, wood, paint, etc.), revenue was under the

operational limit. After less than three years after opening its first store, Home Depot closed all

of its then twelve locations in 2009 (Gao 2013). Seeing as a DIY attitude is typical of an internal

direction culture and China is clearly an outer direction culture, It is evident that Home Depot

failed in China because a lack of cultural competence and failure to adapt effectively.

This particular case is strong evidence that a multinational which fails to understand the

cultural underpinnings of its customers, sets themselves up for failure. To clarify, this is not to

say that expanding into new markets outside their home culture will end in failure. On the

contrary, there are many benefits that are achievable through expanding globally. Proper
 10

expansion can yield benefits such as spreading fixed costs, pooling purchasing power, reducing

operating costs, leveraging market power, and many others (Gupta and Govindarajan 20001).

Now that low market share has been shown to be the outcome of a lack of cultural competence

and adaptation, the case of McDonald’s, an industry leader in market share (Fast Food Market

Share 2021) will be examined to further support the claim that high market share is the result of

cultural competence and effective adaptation.

McDonalds: High Market Share Through Cultural Competence

McDonalds has succeeded in more than 100 countries, with over 36,000 locations around the

globe (Securities and Exchange Commission 2020. Furthermore, according to a Sponsorship

Research International survey, the “golden arches'', a staple of McDonald's brand recognition,

were recognized by 88 percent of those that participated in the survey, meanwhile, only 54

percent recognized the Christian crucifix (Schlosser 2001). McDonalds earned this type of global

prominence for the most part by providing value through exploiting and expanding its front-end

(customer facing) resources. Exploiting a company’s front-end resources includes (but is not

limited to) expanding its customer base and better serving its customers by providing more and

better products such as new menu items. Furthermore, expanding a company’s resources

includes (but is not limited to) acquiring new market knowledge, adding new brands (such as

McCafe), and recognizing trends sooner (Roseman 2020).

McDonald’s early history was centered around adding value through expanding

resources, (i.e. improving quality, efficiency, and consistency) (Ritzer 2015) and to a lesser

extent exploiting back-end components of the business. Although this garnered them domestic

prominence, their global value add strategy, encompassing both exploitation and expansion of

resources is related to cultural competence and is what has been their success defining feature.
 11

There are countless cases of McDonald’s creating value through its customer-facing part of the

business when operating internationally, however the cases of India, France, Japan, China, and a

few others will be referenced for evidence of this; the first of which will be that of McDonald’s

in India. “Glocalization” is the combination between globalization as well as localization

(Crawford and Humphries 2015). The way in which McDonalds actually executes its

globalization strategy is through adaptations to its menu, promotion, trademarks, restaurants,

employees, and service (Crawford and Humphries 2015 ).

While McDonald’s consistently maintains certain menu items such as their French fries

which are sold in every single one of their locations, many locally offered items are carefully

selected to cater to target populations (Baack, Harris, and Baack 2016). Examples of these

locally targeted menu items include cases of both standardization (a major brand point of

McDonald’s) as well as localization. “The significance of sales revenue in McDonald’s

expansion is consistent with its learning about the propensity of local fast food consumption”

(Shen, and Xiao 2014). There are countless cases of McDonald’s doing this when operating

internationally, however the cases of India, France, Japan, China, and a few others will be

referenced for evidence of this; the first of which will be that of McDonald’s in India.

The most recent census results (published in 2011) put India’s population at just over 1.2

billion people; of those 1.2 billion, about 960 million identify as Hindu ("Religion Data 2011).

Because Hinduism practices outline abstaining from meat products as well as elevating the cow

(whose meat is used in many of McDonalds’ conventional menu items) McDonalds changed

much of their menu to appeal to India’s massive population (both Hindu and non-Hindu). Beef

patties were converted to chicken and vegetarian friendly patties, McDonalds’ infamous Big Mac

was changed to the Maharaja Mac, made with lamb and eventually chicken patties instead of
 12

beef patties (Kannan 2014). The difference in taste preferences was also taken into consideration,

and multiple spices were incorporated into their offerings to appeal further to Indian’s taste

preferences (Kim 2021). Although the adaptation of McDonalds menu items have been altered to

appeal to the Indian cultures preferences, McDonalds maintains its successful strategy of

consistency.

“McDonald's has managed to balance the need to maintain a core identity with making changes

to fit local markets” (Baack, Harris, and Baack 2016). They even preserve a similar layout of its

menu as well as the types of meals they offered is apparent when looking at figure 3 below,

which is taken from a McDonalds location in the Karnataka state capital of Bangalore, India and

depicts the offerings of that Indian location.

Figure 3: Menu of the McDonalds of Bangalore Central Mall, Bangalore, India

Other cases of localized menu offerings include the Greek Mac in Greece, the McMelt in

Brazil, buyram rice porridge in Indonesia, kao fan burger in Hong Kong, and countless more
 13

(Crawford and Humphries 2015). The sheer number of these adaptations further exemplifies the

extent to which McDonald’s focuses on local culture as a model of globalization (Clark 2021).

Furthermore, McDonald’s often sources raw materials locally based on its locations. For

example, 100% of both angus beef as well lamb that are used in menu items in New Zealand are

sourced from within the country (Crawford and Humphries 2015). Furthermore, “100% British

and Irish beef burger patties, 100% British pork, and even 100% British milk, all locally sourced

foods from British and Irish farms” (Crawford and Humphries 2015), further exemplifying their

localization strategy implementation.

Not only does McDonald’s menu offerings take into consideration the target market’s

culture and sourcing of raw materials, but also its marketing and promotional strategies. With

such a wide scope of markets it is present in, Macdonald’s keeps the local culture in mind when

developing promotional strategies. McDonald’s does participate in broad promotional campaigns

such as partnerships with the Olympics and World Cup, ensuring their brand is seen and

recognized by a majority of world nations. "The Olympic Games has reinforced our reputation as

a truly global brand." Meanwhile, they also promote their brand through locally popular

sponsorships of individual athletes, targeted community involvement initiatives, locally popular

franchises, and so on. As for the company’s marketing strategy, further culturally specific

targeting is clearly used and is a major reason why their market share is so large. Marketing

campaigns that exemplify this are many, some of which are campaigns in Hong Kong, Indonesia,

and many more. In Hong Kong, McDonald’s recognized the attention and importance the

population places on public welfare and environmental awareness (Crawford and Humphries

2015) and therefore has utilized marketing campaigns to position themselves as a company that

values and works to achieve these goals. In East Asian countries such as Indonesia, McDonald’s
 14

target audience is the youth (as is also true of most McDonald’s target audiences); therefore

through local market research, they identified that the best way to advertise to the youth target

audience was through television advertising and therefore invested in ads accordingly. This is

because “30% of Malaysian children watch over 8 hours of television per day during holidays

and are exposed to over 2.5 hours of advertisements per day” (Hastings et al. 2007). The reason

for this is appealing to children builds lifetime brand loyalty and they do this through targeted

“songs, jingles, toys, gifts, collectibles, “lovable characters,” and a clown” (Kincheloe 2011).

Despite operating advertising campaigns that portray similar notions that McDonald’s is a

neighborhood restaurant, (Crawford and Humphries 2015) the makeup and methods used vary

and are culturally specific.

In a similar way, McDonald’s alters its trademarks depending on the target market. In

Europe, for instance, McDonald’s has altered its logo and opted to replace the classic red

backdrop with a green backdrop (Crawford and Humphries 2015) This seemingly small change

was meant as a sign that McDonald’s is an environmentally conscious company, a factor that has

become important to consumers with the rise of environmental sustainability support, both an

ecological and sociocultural factor of their general environment that has been addressed by the

company. Albeit a different advertisement than most of the world is used to, the Japanese

advertisement campaign shown below targeted the adult population of their Japanese market.

This is because the trend of costume play is popular among the adult Japanese population, which

McDonald’s identified and adapted their trademark mascot accordingly, exhibiting sociocultural

competence.
 15

Figure 4: McDonald's Tomato McGrand (McDonald’s 2011)

As for McDonald’s restaurants ownership and operation, the company often shifts away

from its company-owned store model when dealing with cultures that differ significantly with

American cultural dimensions. In Asian countries for example, McDonald’s operates many

locations that are run jointly in a 50/50 relationship (Crawford and Humphries 2015). In a way,

the joint partnership reflects the level of glocalization, where more of the company’s localization

strategy is left to the location owners than in say a 100 percent company owned location in

Europe. This model also reflects an understanding of the theoretical approaches of Frons

Trompenaars and to an extent Edward T. Hall. The method of placing cultural underpinnings of a

population on a scale aids in the comparison of cultures to one another. For instance, in countries

which exhibit vastly differences in multiple dimensions of Trompenaars’ model such as in

Arabic countries, restaurants are 100% owned and operated by local businesses (Commercial

Real Estate Lessons From McDonald’s 2020). In other words, McDonald’s found it more

effective to leave restaurant operations in the hands of the owner, favoring an “act locally”

approach. As for the buildings themselves, McDonald’s does not maintain a standard design

layout for all of their locations, but instead alters them based on a variety of preferences
 16

(Racoma 2019). “In France, the purpose of food is pleasure, and even a home cooked meal or

something diners savor for a long period” (Rapaille 2006). Therefore, McDonald’s models their

French locations to reflect a sense of comfort and modernity and to appease the French

consumer’s view on food as a means for pleasure. Rapaille, a famous French marketing

consultant, would classify this adaptation as “on code” with the French dining culture. This also

reflects McDonald’s cultural competence as it relates to French synchronous views on time (past,

present, and future are all equally important) (Trompenaars 125).

McDonald’s employees, totaling more than 200,000 as of 2019 (Securities and Exchange

Commission 2020)are also conduits through which the company adapts to different markets.

Although all managers that work for the company follow a development program, various

programs, training programs, and qualifications are used by the company for their employees

based on a few factors. Because France is McDonald’s largest European market by number of

locations (1,485 locations as of year-end 2019), the company has a major stake in the market’s

success (Securities and Exchange Commission 2020). As previously mentioned, the French

view food as a means of achieving pleasure, and as such, prefer a meal prepared by highly

accredited chefs, evident by the French word “chef” being synonymous with a conductor of an

orchestra (Rapaille 2006). With this in mind, McDonald’s supports chefs of their French

locations in attaining prestigious certifications so as to meet customer expectations as well as the

country’s qualifications (Crawford and Humphries 2015). This adaptation can be categorized as

adding value through back-end expansion and the result of regulatory as well as sociocultural

factors of the company’s general environment.

Service is another aspect of McDonald’s model for success and is locally adapted. In

countries like China, the relationship between employee and customer is seen more in the
 17

context of a personal relationship. As a result of McDonald’s cultural competence, they employ

numerous more employees whose job it caters to the customer’s needs (questions, playing with

customer’s children, etc.) While such a level of service is not as important to customers in the

United States, it is crucial to achieving success in ….. cultures, as can be seen in the following

case.

China was the world’s largest economy as of 2019 (using the purchasing power parity

(PPP) metric) with a GDP over $24 trillion compared to the United States’ 2019 GDP of just

under $21 trillion ("How Big Is China’s Economy? Let The Big Mac Decide" 2020). )

McDonalds opened its first Chinese location in October of 1990 and has expanded its operations

in the country to over 3,300 locations as of 2019 (Securities and Exchange Commission 2020).

So what aided in their seemingly exponential growth in the Chinese market? Their utilization of

cultural underpinnings specific to the Chinese population (i.e. individualism/collectivism, power

distance, etc.) in order to implement certain business strategies based on those underpinnings.

Frons Trompenaars’s cultural dimensions in the context of Chinese culture was referenced many

times over their time in China and was a driving factor in their high market share in the country.

In March 15, 2012, China Central Television(CCTV), a state operated television station,

aired a half hour show aimed towards ousting the McDonald's location in Sanlitun, China for

selling food past their expiration dates. McDonalds, only thirty minutes after the broadcast was

aired, announced the suspension of all operations at the Sanlitun location, but more importantly,

posted an apology on a microblog shortly after their announcement. The apology was forwarded

more than 17,000 times and more than 13,000 comments were left on the McDonald's account,

with one comment reading, “The response speed is impressive! This crisis management! It [is a

model] for learning” (Zhu 289). In the aftermath of the broadcast, McDonald’s management of a
 18

major crisis became the “gold standard” for crisis management (Zhu 489).McDonald’s social

media response to the crisis is a model for other companies to aim towards and utilizes aspects of

Trompenaars’s seven cultural dimensions model as it relates to the Chinese population. Besides

getting in front of crisis situations early, the use of microblogs as a method to reach the

maximum amount of the Chinese customer market takes into account the strong collectivist as

well as high power distance typical of the Chinese culture. To elaborate, McDonalds understood

how the Chinese are likely to trust information sent (and therefore endorsed) by a friend and due

to the quick spreading nature of social media, trust was restored and even strengthened due to

McDonald’s methods of managing the crisis. The level of service by McDonald’s public

relations staff was also evident of the diffuse culture of China as well.

External Analysis

Examining McDonald’s industry landscape is vital in determining whether or not

McDonald’s “formula for success” can be replicated by another firm(s). The first decision that

must be made in order to discover this is in which industry McDonald’s competes in. According

to the company’s stock categorization, it is listed as being in the restaurant industry, more

specifically, the quick service restaurant (QSR) genre of the industry, commonly referred to as

the fast food restaurant industry (Celentano 2019). It is important to note that McDonald’s is not

just a fast food restaurant company; it is also a real estate company, with 36,521 out of their

39,198 locations being operated as franchises (Securities and Exchange Commission 2021).

Therefore, much of the revenue and value to McDonald’s stems from its ownership of either the

building or the land on which the location is built on or both (Jeon et. al. 2016). Its categorization

as a fast food/restaurant company will be used for the industry analysis. Michael Porter’s “five

forces',' outlined in an article in Harvard Business Review, describe five external forces that
 19

affect a firm inside a given industry: Threat of new entrants, threat of substitutes, bargaining

power of suppliers, bargaining power of buyers, and rivalry among existing competitors,

illustrated in figure 5 (Porter 1979).

Figure 5: Porter’s Five Forces for McDonald’s

Threat of new entrants is a fact of Porter’s that affects all businesses; the ability to

account for the ease of entry into an industry through barriers of entry directly affects an

industry’s internal rivalry and components of business such as profit, market share, and so on

(Porter 1979). Potential fast food businesses looking to break into the industry require little

capital to do so. Although the initial cost of opening a location(s) varies depending on a number

of factors such as location, building costs, labor costs, etc., in general, the capital requirement is

relatively low. Furthermore, the learning curve is relatively low; someone looking to open a fast

food location does not require a prerequisite of a degree or particular expertise in order to open a

fast food business. The fast food industry also has high product differentiation, varying
 20

governmental policy dependent on size, moderate economies of scale factors, and so on. For

these reasons, the general threat of new entrants in the fast food industry is high. (Kasi 2020)

The next of Porter’s five forces is that of the threat of substitutes. Substitute

products/services can be defined as goods that serve a similar function and can replace the

original product or service. The fast food industry operates on the principle that all humans have

to eat, however, food can more often than not be substituted by that of another type of food or

from another source, resulting in a low switching cost for consumers of fast food. What is more

is that substitute products can affect a business like McDonald’s rather quickly, furthering the

need to stay ahead of those looking to cut into business quickly and drastically. If a firm does not

take into consideration this factor, a reduction in prices and/or performance improvements by a

competitor could negatively impact McDonald’s market share (Porter 1979). The fast food

industry is one that exemplifies a strong threat of substitute products/services so should be

examined carefully by McDonald’s and other firms within the industry and acted upon

accordingly. Taking these aspects of the fast food industry into account, it can be concluded that

the industry’s threat of substitutes is high (Kasi 2020).

What Porter refers to as the bargaining power of suppliers is the third factor that affects

an industry environment and refers to the amount of leverage a supplier(s) to a particular

business has either by adjusting their product’s prices, quality, and/or availability (Porter

1979). Fast food companies for the most part have a wide variety of options when it comes to

acquiring the raw materials needed to operate their business (i.e. meat, vegetables, buns, cheese,

etc.) regardless of their region of operation, thus lowering the bargaining power of suppliers of

fast food establishments. Another aspect that contributes to fast food supplier’s bargaining power

comes from the lack of differentiation possible in goods/services supplied to buyers such as
 21

McDonald’s. There exists relatively low opportunity for fast food suppliers to innovate or

differentiate their product in any meaningful way, lowering their bargaining power over fast food

firms like McDonalds. Furthermore, service differentiation does not make a drastic impact on

supplier power either (Kasi 2020). As a result of the generally high number of suppliers and low

innovation/differentiation levels, the bargaining power of suppliers to the fast food industry is

considered low (Balaizs 2016).

The bargaining power of buyers in the fast food industry mirrors the bargaining power of

suppliers in a few regards (Porter 1979). Due to the high number of possible suppliers to any fast

food firm, which causes low switching costs for buyers, buyers in the fast food industry

experience higher bargaining power. Another related factor comes in the form of the low levels

of innovation and differentiation typical of fast food suppliers. Suppliers to fast food firms are

also typically not large enough to be in a position to bargain as effectively with large fast food

corporations such as McDonald’s, whose account would most likely by the largest of whichever

supplier the fast food corporation chooses to source its supplies from. In conclusion, it is clear

that buyer power is high in the fast food industry (Kasi 2020)

The final, and arguably most influential factor of Michael Porter’s five forces as it relates

to the fast food industry comes in the form of rivalry among existing firms. Competition in the

fast food industry is extensive; multiple large corporations engage in fierce competition on a

global scale (Balaizs 2016). These tactics include price wars, product/service differentiation,

advertisements, etc. to coax consumers to purchase their products over their consumers, and with

low switching costs for consumers, the rivalry grows. As of 2019, McDonalds clearly holds the

title of the firm which has the highest market share, as evident in figure 6, however others

constantly compete to overtake McDonalds and do so through a variety of methods including

 22

advertising, product and service differentiation, and so many more. In addition to these factors,

the industry’s high number of small fast food firms, coupled with industry specific factors

contribute to a very high level of rivalry within the fast food industry (Kasi 2020).

Figure 6: Fast Food Industry Market Share

In order to survey the landscape that a firm competes in, it is not enough to solely focus

and understand the five forces that directly affect an industry. It is also necessary to understand

the general environment, as it can affect firms in a variety of ways, including, but not limited to,

affecting the shape of each of the five industry forces. An easy way to think about the general

environment can be achieved by breaking it down into eight categories: complementary products

or services, technological change, general economic conditions, population demographics,

ecological/natural environment, global competitive forces, political, legal, and regulatory forces,

and social/cultural forces (Roseman 2020). Along with any other business, McDonald’s

experiences most, if not all of these general environmental factors, however in the sake of

relativity, a STEEP analysis will be used, in which technological, economic,

 23

ecological/environmental, political /legal/regulatory, and sociocultural factors will be examined

since they apply more directly to fast food industry firms such as McDonald’s. In their annual

report to the SEC, the company wrote,

We encounter differing cultural, regulatory, geopolitical and economic environments

within and among the more than 100 countries where McDonald’s restaurants operate,

and our ability to achieve our business objectives depends on the system's success in

these environments (United States Securities and Exchange Commission, 2020).

Although the factors included (cultural, regulatory, geopolitical and economic) do in fact pose

threats to their business, they simultaneously provide opportunities for the firm and, as

previously mentioned, the ability to achieve McDonald’s, as well as other firms, business

objectives relies on the understanding and addressing of the relevant categories of their general

environment, which is illustrated in figure 7.

Figure 7: A firm’s General Environment (Dyer et. al. 2015)

 24

The rate at which technological change both within the fast food industry and outside it,

is becoming increasingly important to increasing a company’s advantage and therefore its

application is vital. In the case of McDonalds, investments in restaurant modernization, digital

engagement and delivery services (Securities and Exchange Commission 2020) are being made

to address and stay ahead of the curve when it comes to efficiency, brand awareness through

advertising, and overall satisfaction (Baruah 2020). It is the result of McDonald’s continued

appreciation and addressing of this external factor that is important to their maintained

competitive advantage.

The nature of global operation particularly exposes multinationals such as McDonald’s to

both increased risk as well as increased possible reward when it comes to economic factors

(Baruah 2020). Volatility in currency value of currency (inflation/deflation), disposable income,

unemployment rates, price of raw materials, and so on vary drastically depending on location

(Frue 2018). With operations in over 100 countries, each, if not more than one of these economic

factors could affect the company (and others in the industry) simultaneously. This aspect of a

firm’s general environment directly affects the ability for a company such as McDonald’s to

effectively maintain high market share and also needs to be taken into consideration.

Increasing consciousness of ecological/environmental factors of businesses is not to be

taken lightly. Climate change in general, greenhouse gases, energy and water resource reduction

are all factors that have become on the forefront of consumers’ minds and has affected their

purchasing preferences (Crawford and Humphries 2015). With such a large corporation,

McDonald’s must address their impact on the Earth by reducing their greenhouse gas emissions,

water waste and energy waste. Although not as prominent factor as the others, it remains an

important aspect of their business that needs to be taken into account

 25

Operating in more than one country, let alone more than 100, carries with it political,

legal, and regulatory factors (especially in the 21 st century) that need to be taken into

consideration. Political instability, such as in the case of the United Kingdom’s withdrawal from

the European Union, affected McDonald’s and is an important factor to address. In a similar

way, laws and regulatory forces pose challenges to both multinationals like McDonald’s as well

as smaller businesses (Frue 2018). Business operations can be adversely or positively affected

depending on the status of regulation standards (i.e. health and hygiene), litigation, taxes, etc.

and are also necessary to account for (Securities and Exchange Commission 2020).

The final, and arguably most relevant factor of McDonald’s general environment is the

social/cultural forces affecting their business. Consumer lifestyle changes such as health

conscious consumption are a major factor that is effecting McDonald’s and the fast food industry

as a whole (Frue 2018). Other sociocultural factors such as religious beliefs, attitude towards

foreign businesses, demographics, and so many more also are vital to its general environment,

and therefore how a company can operate in order to accomplish their goals. As will become

evident later on, McDonald’s focus on this factor is heavily important in how they operate their

business through adaptation to local markets and is a major reason why McDonald’s

continuously accomplishes their goals and maintains a high market share. It is clear that

McDonalds makes careful consideration before expanding into foreign markets.

McDonald’s is the world’s largest fast food company in the world by market share (Fast

Food Market Share 2021). The aspect of their business model that separates them from their

competition is their capability to adapt depending on the market they are serving. This comes in

the form of altering their menu, marketing/promotion, trademarks, restaurants (both the building

itself and the ownership agreements), employee training, and service based on the customer’s
 26

needs while maintaining a globally recognized brand. Moreover, it accomplishes this by

understanding the forces that act on its business (and the industry as a whole) as well as the

cultural dimensional underpinnings of the individuals that make up the market they are trying to

serve. By first understanding the general environment of their business (porter's 5

forces/STEEPLE analysis), then identifying the makeup of individual markets

(Trompenaars/Hall’s models), they are able to adapt the previously mentioned aspects of their

business to culturally unique preferences, norms, customs, values, etc. while still delivering

superior quality, taste, and service to their customers. It is the combination of these business

practices that has led to McDonald’s to achieve their goal of global market share.

Conclusion

So can this model be replicated and deliver similar success to other businesses? The

answer is yes and no. Although McDonald’s model of using cultural dimensions and adaptation

can be used successfully, businesses which operate exclusively in predominantly homogeneous

populations may find trouble utilizing the same model. Furthermore, firms which are situated

outside of the quick service/fast food industry cannot utilize McDonald’s general environment

model specifically. With that being said, a step in the right direction would be for the company to

adapt/modify McDonald’s business model to suit their needs, just as McDonald’s has done with

their menu, promotion, trademark, restaurant, employee, and service

 27

Bibliography

Baack, Daniel W., Eric G. Harris, and Donald Baack. 2016. McDonald’s Global Expansion 
Adaptation and Differences in Taste London: SAGE.

Balaizs, Barbara. 2016. "Strategic Analysis- McDonald’s In China". MBA, Coventry University.
https://www.academia.edu/32379197/Strategic_Analysis_McDonalds_in_China_W_o_r_
d_C_o_u_n_t_6095_4_2_5_2_0_1_6_SUBMITTED_BY_SUBMITTED_TO_Strategic_
Analysis_McDonalds_in_China_MBA_General_Management_TABLE_OF_CONTENT
S.

Barker, Kimberley, PhD,M.B.A., R.O.D.C. 2020. "Creating Change and Cross-Cultural

Competence while Conducting Business on the Global Stage." Organization
Development Journal 38 (No. 3) (Fall): 77-85.
https://libdb.fairfield.edu/login?url=https://www-proquest-
com.libdb.fairfield.edu:8443/scholarly-journals/creating-change-cross-cultural-
competence-while/docview/2456171537/se-2?accountid=10796.

Baruah, Priyanki. 2020. "STEEPLE Analysis Of Mcdonald’S". Planning Tank.

https://planningtank.com/market-research/steeple-analysis-mcdonalds.

Celentano, Domenick. 2019. "How Do QSR, Casual Dining, And Fast Casual Restaurants
Differ?". The Balance Small Business. https://www.thebalancesmb.com/types-of-
restaurant-formats-1326193.

Clark, Wendel. 2021. "Product Development Strategy For Mcdonald's". Small Business -
Chron.Com. Accessed March 1. https://smallbusiness.chron.com/product-development-
strategy-mcdonalds-12207.html.

"Commercial Real Estate Lessons From McDonald’s". 2020. Business.Com.

https://www.business.com/articles/mcdonalds-business-model/.

Crawford, Alice, Sarah A. Humphries PhD., and Margaret M. Geddy PhD. 2015. "McDonald's:
A Case Study in Glocalization." Journal of Global Business Issues 9 (1) (Spring): 11-18.
https://libdb.fairfield.edu/login?url=https://www-proquest-
com.libdb.fairfield.edu:8443/scholarly-journals/mcdonalds-case-study-
glocalization/docview/1711198528/se-2?accountid=10796.

Dyer, Jeffrey H., Paul Godfrey, Robert Jensen, and David Bryce. 2015. Strategic Management:
Concepts and Cases. Chichester: Wiley Textbooks.
http://public.ebookcentral.proquest.com/choice/publicfullrecord.aspx?p=5120736.

"Fast Food Market Share | T4". 2021. T4.Ai. https://www.t4.ai/industry/fast-food-market-share.

Frue, Kiesha. 2018. "PEST Analysis Of Mcdonald’S: Which Factors Affect Their Future
Success". PESTLE Analysis. https://pestleanalysis.com/pest-analysis-of-mcdonalds/.
 28

Gao, May Hongmei. 2013. “Culture Determines Business Models: Analyzing Home Depot’s
Failure Case in China for International Retailers from a Communication Perspective.”
Thunderbird International Business Review 55 (2): 173–91.
https://doi.org/10.1002/tie.21534.

Gupta, Anil K. and Vijay Govindarajan. 2001. "Converting Global Presence into Global
Competitive Advantage." The Academy of Management Executive 15 (2) (05): 45-58.
doi:http://dx.doi.org.libdb.fairfield.edu/10.5465/ame.2001.4614881.
https://libdb.fairfield.edu/login?url=https://www-proquest-
com.libdb.fairfield.edu:8443/scholarly-journals/converting-global-presence-into-
competitive/docview/210519169/se-2?accountid=10796.

Hall, E.T. 1976. Beyond Culture. Anchor Books. Anchor Books.

Hastings, Gerard, Laura McDermott, Kathryn Angus, Martine Stead, and Stephen Thomson.
2007. "The Extent, Nature And Effects Of Food Promotion To Children: A Review Of
The Evidence". Who.Int.
https://www.who.int/dietphysicalactivity/publications/Hastings_paper_marketing.pdf.
https://www.sec.gov/Archives/edgar/data/63908/000006390821000013/mcd-
20201231.htm

Jeon, Hyo Jin (jean), Brinja Meiseberg, Rajiv P Dant, and Marko Grünhagen. 2016. “Cultural
Convergence in Emerging Markets: The Case of McDonald’s in China and India.”
Journal of Small Business Management 54 (2): 732–49.
https://doi.org/10.1111/jsbm.12168.

Kannan, S. 2014. How McDonald's conquered India. [online] BBC News. Available at:
https://www.bbc.com/news/business-30115555 [Accessed 7 February 2021].

Kasi, Adam. 2020. "Porter's Five Forces Of Mcdonald's". Porter Analysis.

https://www.porteranalysis.com/porters-five-forces-of-mcdonalds/.

Kim, Stephen. 2021. "CASE STUDY: MCDONALD's IN INDIA".

Cultureandbusiness.Weebly.Com. Accessed February 3.
https://cultureandbusiness.weebly.com/case-study.html.

Kittler, Markus G., David Rygl, and Alex Mackinnon. 2021. “Special Review Article: Beyond
Culture or beyond Control? Reviewing the Use of Hall’s High-/Low-Context Concept.”
https://doi.org/10.1177/1470595811398797.

McDonald's. 2011. Tomato Mcgrand. Video.

https://www.youtube.com/watch?v=xmdJ_MQMdh8.

Porter, Michael. 1979. "How Competitive Forces Shape Strategy". Harvard Business Review.
https://hbr.org/1979/03/how-competitive-forces-shape-strategy.
 29

Racoma, Bernadine. 2019. "How Mcdonald's Adapts Around The World". Day Translations
Blog. https://www.daytranslations.com/blog/how-mcdonalds-adapts-around-the-world/.

Rapaille, Clotaire. 2006. The culture code: an ingenious way to understand why people around
the world buy and live as they do. New York: Broadway Books.

"Religion Data - Population Of Hindu / Muslim / Sikh / Christian - Census 2011 India". 2011.
Census2011.Co.In. https://www.census2011.co.in/religion.php.

Ritzer, George. 2015. The McDonaldization of Society Eighth edition. Los Angeles: Sage.

Roseman, Jeffrey. 2020. "Corporate Strategy". PowerPoint presentation, Fairfield University,

CT.

Rutherford, Adam. 2018. "The Human League: What Separates Us From Other Animals?". The
Guardian. https://www.theguardian.com/books/2018/sep/21/human-instinct-why-we-are-
unique.

Rutledge, Brett. 2011. "Cultural Differences - High Context Versus Low Context". The
Articulate CEO. https://thearticulateceo.typepad.com/my-blog/2011/08/cultural-
differences-high-context-versus-low-context.html.

Schlosser, Eric. 2001. Fast Food Nation: The Dark Side of the All-American Meal. United
States: Houghton Mifflin Harcourt.

Securities and Exchange Commission. 2021. "Form 10-K 2021: McDonald's Corporation,”
Washington, DC: McDonald’s Corp.

Securities and Exchange Commission. 2020. "Form 8-K 2020: McDonald's Corporation,"
Washington, DC: McDonald’s Corp.
https://www.sec.gov/Archives/edgar/data/63908/000006390820000012/form8k.pdf

Shen, Qiaowei, and Ping Xiao. 2014. “McDonald’s and KFC in China: Competitors or
Companions?” Marketing Science (Providence, R.I.) 33 (2): 287–307.
https://doi.org/10.1287/mksc.2013.0824.

"The Seven Dimensions Of Culture: Understanding And Managing Cultural Differences". 2021.
Mindtools.Com. Accessed February 2. https://www.mindtools.com/pages/article/seven-
dimensions.htm.

Trompenaars, Frons. 1994. Riding the Waves of Culture : Understanding Diversity in Global
Business Burr Ridge, Ill: Irwin Professional Pub.

Zhu, Lin, Deepa Anagondahalli, and Ai Zhang. 2017. “Social Media and Culture in Crisis
Communication: McDonald’s and KFC Crises Management in China.” Public Relations
Review 43 (3): 487–92
 30

https://fairfield.primo.exlibrisgroup.com/discovery/fulldisplay?docid=cdi_gale_infotraca
cademiconefile_A498030387&context=PC&vid=01FUNI_INST:MAIN&lang=en&searc
h_scope=MyInst_and_CI&adaptor=Primo%20Central&tab=Everything&query=any,cont
ains,Social%20media%20and%20culture%20in%20crisis%20communication:%20McDo
nald’s%20and%20KFC%20crises%20management%20in%20China&offset=0