Wednesday, October 24, 2012

Mac Donald in China

Nowadays Mac Donald is very successful in China. However it has not always been this way!

I will try to analyze what makes the success of Mac Donald.
What are the key success factors?
  • Apparent small price strategy
Mac Donald displays small prices. A lunch menu at 15 rmb! (same and less than a Chinese street fast food in many big cities).
  • Incredible brand image 
This image was conveyed by Hollywood movie industrie. All Chinese people knew that Mac Donald was foreigner, prestige, fashion...
  • A few suitable and unique products
Mac Donald was the only place where you could find some unique product and a few product that Chinese people like: ice cream, french fries, coke, ketchup, pie
My wife once told me that when the first Mac Donald opened in Changsha, customers were queing hours to get inside. They would then take as many ketchup doses as possible and you could see them eating ketchup on the street!
  • The only place where you could sit and rest
For a long time, Mac Donald was the only place were you could sit down and rest in a modern clean environment while enjoying the air conditioning in summer and the heating in winter. This means a lot. In China people want to find a place to chat. They want to escape the terrible summer heat and winter cold. Most also can't afford to pay a lot for this confort.
  • Children heaven 
Following its global strategy Mac Donald was in China a children heaven. There were children playground, dances, birthday events, songs and food that children love.

However Mac Donald was in great peril back in 2007: all started to go wrong:
  • The same food offer all around the world
One global food offer strategy put Mac Donald at great risks in China. In fact Chinese people didn't like most of this offer: they didn't like bread, cheese. They were allergic to beef. Only a few pocket food, french fries, coke and desert were suitable. (Truth be told, the food offer in China is not really the same: hamburgers size in China are much smaller as compared to European or American hamburgers.)
  • Tough competition from KFC and others
KFC and others brands started to challenge Mac Donald. KFC had a much better offer: it suits perfectly Chinese taste. Chinese competitors also offered "children heaven", heating and air conditioning at fair prices.
  • Too many Mac Donald kills Mac Donald
Mac Donald Group was losing control as too many franchised were opened. Sometimes the restaurants were all too close from each other: creating some canabilisation effect
In 2007, I spoted one bankrupt Mac Donald on Changsha city center!

Mac Donald reacted and imagined its new and current strategy: another success story!
  • Coffee place environment
Mac Donald implimented cheap coffee and a design modern new environment. Mac Donald has even televisions. 
  • Sorry children: kids heaven is over!
Mac Donald new focus group are older customers and not only children.
  • Mac Donald opens all night long
  • Mac drive
Anticipating the boom of cars, Mac Donald emphasizes on its new Mac drive units
  •  A new food offer
Mac Donald copied KFC food offer while launching chicken based products

The big chance of Mac Donald and a core explanation to Mac Donald success in China is the change in Chinese people taste due to globalization!
Mac Donald benefits from the new taste of young Chinese people for melted cheese!

Back in 2006, you could almost never find any hamburger with cheese in Changsha. Cheese delivery to Mac Donald were rare and the cheese hamburger was always unavailable. Today you can find it everywhere and Chinese people go to Mac Donald instead of KFC in order to eat this melted cheeseburger! 

Nodoubt KFC will develop some cheeseburger soon. It already started to do so for its breakfast offer!

Stop and go customers come in all day and night long. They rest, sleep, discuss enjoy the air conditionning in summer and heating in winter

Playground: Mac Donald strategy in China: target young children and use western as well as Chinese festivals in order to attract families. It builds children loyalty while offering small presents.
Children love Mac Donald: ice cream, coke, french fries, ketchup and games. More recently younger Chinese generation love melted cheese. Chinese parents know that cheese is good for health and make children grow as tall as foreigners! (yet another Chinese cliché)

Mac Donald uniform
Clean and won't scare customers away: it doesn't look too expensive/ too much restaurant style

24 opening hours very good in China: this is part of Mac Donald new strategy in order to attract different customers not only customers and families
Chinese people go out at night. Salaries are low: 7rmb per hour and quickly made profitable.

Store window: you can spot it from far away at night

 You should communicate on small price in order to attract customers inside

Ice creams and drinks are put forward to drain customers all day long: middle class look for a place to relax and a fair price. There is almost no other place in China where you can stay and relax at a fair price: no parks, no bench, no place with air conditionning and heat.
At Mac Donald the prospect customer knows what to expect: low price.

Thanks to its image, its brand, Mac Donald opened in China many smaller outlets that make benefits only with ice creams, french fries and cakes.

Ice cream and Oreos biscuits. Oreo is very fashion this summer in China.

Mac Donald spoons are great for storage: they interlock. Also the impressive size of the spoon is good for the image.

Chinese customers love prickles

  • Mac Donald was threatened: negative unealthy fast food image, underpaid or not paid workers scandals! Most Mac Donald products were not suitable for Chinese tastes.
  • Mac Donald reacted while launching lunch meal at 15rmb and offering coffee. opening hours 24 hours, Mac Drive, new design. Mac Cafe have a modern and prestige decoration, smaller prices, a television, a more adult and prestige environment. 
  • Mac Donald also copied KFC developing fried chicken burgers.
  • Mac Donald strengthened its traditionnal children/ families customers with a drinks, french fries and ice cream offer. 
  • Mac Donald diversifies in China with Mac Drives and some important partnership with shopping center. Partnership war:KFC, Mac Donald: you must occupy strategic location in new buildings.  

Before Mac Donald looked like this:
Pictures of young people, foreigners, travels

Today foreigners disappear. Instead you have a simple design, light plays like in a cafe. Foreigners are less trendy anymore. Mac Donald knows this and operates some change.

In China Mac Donald started to communicate about health and calories for obese, diabete. But this is still marginal and not a main concern.

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