Why Dairy Queen Is Unable to Become the Number One Ice Cream Consumption Company in China - Case Study Example

? Dairy Queen: Introduction: This paper tries to analyze why Dairy Queen is unable to become the number one Ice cream consumption company in China. It is important to denote that the Chinese market is very luxurious. This is because China has the largest number of people in the world. Their number stands to over two billion people. From this paper, where are going to learn on the dynamics of the Chinese market. This paper seeks to analyze the problems that Dairy Queen faces in its attempt to position itself into the Chinese market, and the attitude and behaviors of its customers. This paper has a recommendation on the best strategy that the business organization needs to employ in China, for purposes of achieving success. In trying to analyze the market performance of Dairy Queen, this paper looks at three management theories; namely contingency, systems and chaos theories. This paper analyzes the marketing department of Dairy Queen, for it is the one which is responsible for the sales that occur in China. Dairy Queen is a chain of fast food restaurants that are under the ownership of International Dairy Queen Inclusive (Douglas, 2012). The company began its operations in 1940 in the state of Illinois. By 1947, the company had over 100 stores, and as of 2010, Dairy Queen has more than 5700 stores all over the world. The largest store of the company is found in Riyadh, Saudi Arabia, while the store that records the highest sales is found in Canada. The company is a pioneer of fast food franchising, and it believes in the exploitation of the emerging markets (Benner and Nelson, 2012). China is an example of such an emerging market. On this basis therefore, this paper tries to explore its marketing strategies in China, and examine the reasons as to why they failed. The Story: On 10th of February 2012, Dairy Queen opened its 500th store in Hu Dong, the financial capital of Shanghai. Dairy Queen first joined the Chinese market in 1991 by opening a branch in Beijing. Ever since entering the Chinese market, the company has experienced growth in terms of its profitability, and market share. China presents the largest market for its ice cream products. The company charged with the responsibility of operating Dairy Queen Franchise products is referred to as Shanghai Shida Catering and Management Company (Benner and Nelson, 2012). On this basis therefore, Dairy Queen operates in China as a franchise. In regard to this therefore, in order to penetrate the Chinese market, Dairy Queen resorted to building strategic alliances with local company. An example is the Shanghai Catering Company. John Gainor, the President of Dairy Queen international agrees with this position, and denotes that it is the major contributor of its successes in the Chinese market (Douglas, 2012). However, it is important to denote that despite the successes of Dairy Queen in capturing a segment of the Chinese market, it is not the number one ice cream consumption company in China. Dairy Queen faces stiff competition from companies such as Nestle, Walls, Haagen Daz, and Baskin Robbins. It is important to denote that Haagen Daz is one of the biggest ice cream consuming companies in China (Lewis and Packard, 2012). Dairy Queen also fails to compete effectively with the Chinese domestic companies in the low end market areas. The Ice Cream consumption habits of the Chinese are dependent on their ability to afford consuming them at luxurious cafes (Aoki, 2012). Majority of the Chinese cannot afford to buy these products at such luxurious cafes, and hence their desire for ice cream products from their local companies. This is because they are affordable, and tailored to meet their needs. On this basis, if Dairy Queen needs to capture this market, which is the largest, then it has to revise its marketing strategies (Kotler and Keller, 2012). It has to develop products that satisfy the needs of both the high end, and the low end consumers. The Three Theories: There are three main theories that will explain the marketing practices of Dairy Queen. The first theory is the contingency theory of management. This theory denotes that managers will enact policies based on the current situation (Robbins and Coulter, 2012). According to this theory, the action of a manager will be based on the important events that are currently happening on the company. According to this theory, the manager will not enact any policies based on market predictions, or the future aspirations of the business organization. This is because there isn’t any best way of managing an organization, or risks that the organization might face. This theory asserts that managers need to design and develop a policy that has the capability of solving the problem at hand quickly, and in the most efficient manner (Robbins and Coulter, 2012). According to this theory, the environment in which a business organization operates in plays a significant role in ensuring whether the business will succeed or not. These environmental factors that influence the operations of a business organization are referred to as contingency factors (Velo, 2012). On this basis, the organization cannot achieve its objective by relying on one policy, and this is because factors that influence its operations usually change. This theory identifies the following as the contingency factors that might affect the operations of an organization (Lewis and Packard, 2012). i. The Government. ii. Technology. iii. Labor Unions. iv. Suppliers and distributors. v. Consumer Interest groups. vi. Competitors of the business organization. Another theory that this paper looks at is the systems theory of management. According to this theory, the organization is an organic and open system that has a variety of subsystems. These sub systems can either be supportive, maintenance, production, adaptive, or even informal groups. According to this theory, the sub-systems of an organization operate in a manner that is inter-dependent, and interactive with each other (Kotler and Keller, 2012). This theory further goes on to denote that the organization creates a linkage between these subsystems through communication, development of objectives, policies and procedures, and other types of coordinative mechanism. On this basis therefore, the systems theory has the following advantages. i. It identifies the various inter-dependent parts of a system. ii. This theory advocates for the study of the inter-relationship process of the various sub systems within a system. iii. The theory manages to highlight the complex nature of management. iv. It is possible to use this theory with other theories of management. v. It is used for the studying of complex organizations, and acts a base for the emergence of new organizations. The chaos theory on the other hand is based on the assumptions that a business organization does not only influence its reality, but it also plays a role in creating the reality under consideration. A simple action of an organization can make an organization either to fail in meeting its objectives, or to succeed in it (Aoki, 2012). This theory denotes that managers need to structure their policies, so that there are checks and balances that will ensure minimal occurrence of mistakes in the organization. This theory is essential in management because it recognizes the fact that every action an individual does in an organization is always under scrutiny (Kotler and Keller, 2012). This theory also recognizes the fact that the relationship between a manager and his employer are inter-dependent. That is a manager will only be a friend to an employee, as long as the employee would want to be a friend to the manager. Finally, this theory recognizes that any action within an organization, no matter how small it is, must be put under scrutiny, and in all circumstances. Problem Statement and Literature Support: From my own perspective, the reason as to why Dairy Queen is not the number one Ice Cream consumption company is because it faces stiff competition from other ice cream companies such as Nestle, Walls, Haagen Daz, and Baskin Robbins. These are American companies, and because of China’s large market structure, these companies decided to invest in the country. Their strategies, just like that of Dairy Queen is to invest in the emerging markets of Asia, America and Africa. For example, Haagen Daz has more than 250 retail outlets in China, with an additional 50 expected later in the year (Kotler and Keller, 2012). This company is one of the main competitors of Dairy Queen in relation to serving ice cream eating customers. The company, just as Dairy Queen enjoys the advantages that come with economies of scale (Benner and Nelson, 2012). That is capturing a large market share due to superiority of resources. Dairy Queen also faces stiff competition from local companies. It is these local companies who are controlling the ice cream industry in China (Lin, 2012). This is because these companies are able to understand the various dynamics of the Chinese market, and hence they will develop their products in a manner that satisfies these market conditions. For example, the manufacture of ice cream flavors like the green tea hibiscus. This is a favorite flavor amongst the Chinese population/people (Doctoroff, 2012). According to the contingency theory, the environment affects the manner in which an organization does business. Business competitors and suppliers are part of the contingency factors that affect the environment. On this basis therefore, the company will only formulate policies based on the environmental condition at hand. For example, due to the need of the Chinese people to consume favored flavors such as green hibiscus, then the company will have to use such ingredients to make ice-creams (Benner and Nelson, 2012). The systems theory on the other hand denotes that within an organization, there are many sub systems. These subsystems are inter-related with one another, and there is a linkage with one another through communication, policy development and leadership. For example, Dairy Queen conducts its activities in China through the Shanghai Shida Catering group. This is a sub system within Dairy Queen, and on this basis, it is the responsibility of this company to market the ice cream products of the company. Shanghai Shida Catering group is a local company, but it has been unable to effectively market the products of Dairy Queen into making it the number one ice cream consumption company (Aoki, 2012). The reasons might be because of communication failures between the head office of Dairy Queen in US, and the offices of Shanghai Shida Catering group. This is because Shanghai only operates a franchise, and it will need the approval of its head office in US, before making any major changes on the production of the ice cream products (Benner and Nelson, 2012). The chaos theory on the other hand involves itself with the recognition of the importance of knowledge in decision making. In as much as the company has had experience in the fast food arena, it should have conducted extensive research on the Chinese ice cream market before rolling out its products. Choosing to rely on information from franchise holders, instead of personally looking for information could be the results of its inability to be the number one ice cream consumption in China. Options: In order for the company to become the number one ice cream consumption company in China, it has to aggressively market its products, and conduct a market research in finding out what needs the Chinese have in regard to the consumption of ice creams (Doctoroff, 2012). The best theory of management to use is the contingency theory. From this theory, it is the environmental factors that affect the operations of the business. These environmental factors include competition from rival organizations, and changing needs of the customers (Wolff and Yankithou, 2012). On this basis, this theory outlines that there isn’t any better policy of managing an organization. In my own opinion therefore, the company will only develop its policies based on the changing needs of the environment. Therefore, its policy making process should be flexible to accommodate these needs. Conclusion: In conclusion, Dairy Queen is one of the fastest growing companies in the world. It operates franchises in different regions of the world, and its main areas of interests are the emerging markets of China and Asia. The theories of contingency, system and chaos explain some of their managerial practices. For instance, the contingency theory evaluates the environmental factors that affect the organization. From this theory, we can denote that the environment in which a business organization operates in can either make the organization succeed or fail. These environmental factors include technology, rival organizations, and consumer behaviors. The systems theory on the other hand denotes that the success of the organization is dependent on the various sub systems operating in it. For example, an organization might have different departments such as HR department and marketing department. These departments work hand in hand in ensuring that the organization achieves success. The chaos theory on the other is based on the recognition of certain aspects of management, and this includes employees relations, and the decision making process. From this theory, we can learn that a minor mistake can result to great losses in an organization. Therefore, there is need of constant monitoring of the decision making process in an organization. On this basis therefore, I managed to learn that management is not an easy task, and for anybody to be a successful manager, there is need of involving all the parties concerned in the decision making process. However, one lesson that I would like to learn is on how to develop a successful franchise in a fast food industry, despite completion from franchise giants such as Dairy Queen. References: Aoki, M. (2012). The Chinese economy: a new transition. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. Benner, D. A., & Nelson, R. R. (2012). Fifth Avenue princess to American dairy queen. Mont Joy, PA: Murgolo Books. 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