McDonald's Entering Bangladesh as a New Market - Research Paper Example

McDonald’s entering Bangladesh as a new market opportunity BY YOU YOUR SCHOOL INFO HERE HERE McDonald’s entering Bangladesh as a new market opportunity Executive summary Consumer behaviour patterns and growth in per capita income levels support opportunities for a strategic entry strategy into Bangladesh. Economic indicators point toward growth in domestic production and in the provision of education to train a previously unskilled workforce. The shifting dimensions between rural living and urban living are substantial in terms of culture and lifestyle, however progressive movements are being undertaken by political forces to bridge the gap between poverty and higher class status. There is a strong political presence in this environment, however it is supportive of new business in a progressive Islamic society. Cultural norms are shifting in Bangladesh, opening market opportunities for the female consumer. Coupled with a rather modern and liberal dietary lifestyle, many of the products offered in Western and other developed Asian markets would complement a progressive nation. McDonald’s mission The mission for McDonald’s is clear: “be our customers favourite place and way to eat. Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience – People, Products, Place, Price and Promotion. We are committed to improving our operations and enhancing our customers experience” (aboutmcdonald’s.com 2010, p.1). The company is committed to common principles such as innovation and the process of marketing in order to gain a satisfactory image from customer groups. Plan to Win suggests a competitive spirit inter-twined in customer satisfaction efforts. However, Bangladesh competition is considerably behind the current trends in marketing and represent an opportunity for entry without significant barriers. McDonald’s vision The vision statement is also clear, describing the company’s desire to make every customer smile when visiting the restaurant due to outstanding service and quality performance (aboutmcdonalds.com). This, again, entails a focus on providing service, a trait that is valued by a society with strong convictions toward Islamic values and in need of new infrastructure related to dining. Market characteristics Fortunately, as with most European, Asian and North American operations, McDonald’s has a mass market appeal due to its outstanding menu options that are both standardized and customized for local dining preferences. To segment specific markets would be difficult as the literature does not support specific consumer characteristics based on psychographic knowledge. Instead, due to the fact that Bangladesh is densely populated in urban areas, urban versus rural markets based on socio-cultural demographics are the target consumer audience. Strategists and marketers view markets from very different angles. CEOs and senior-level governors view markets as stable and rather fixed mediums through which to sell product. Marketers view the individual as the market, as a vessel able to absorb and carry a concentrated message leading to a desired end result. For the benefit of McDonald’s and in order to relate effectively to the primary element leading to success, the consumer, markets will be characterized by their promotional or economic opportunity. Growth in urban regions, such as Dhaka, contribute strongly to a rising retail and commercial infrastructure. Bangladesh is projected to achieve a 5.5 percent increase in output growth in 2011 (Ellis 2010). This identifies with a developing country that is exceeding the expected output of larger nations with well-established supplier and consumer systems. Bangladesh has been forced to absorb many opportunity costs, however, in areas of education in order to establish a quality manufacturing base to support consumerism (Ahmad & French 2010). This has led to an unskilled workforce in order to sustain short-term production needs based on goals for establishing a market presence. This unskilled workforce is available in urban regions. Basic human behavioural assumptions would attest to the idea that diversity in job employment options are a motivator to achieve and remain productive. McDonald’s maintains, at the recruitment level, enormous opportunities to exploit this workforce for new market entry in the urban city. Infrastructure developments include many shopping malls that attract nearly equal attention to local retailers based on price misconceptions. Oxford Analytica (2006) identifies that growth of the middle class consumer and consumption levels continue to rise in these urban regions. Available personal credit and more white collar workers contribute to economic strength , as markets with the resources capable of supporting ongoing business transactions. Common products sold in Dhaka include DVDs, fast food, cars and electronics. There is a stable consumer audience in densely populated urban regions where competition still remains weak in terms of global brand exposure. Why is there weak competition? A study was conducted that identified many consumers in Bangladesh had a difficult time understanding brands and their affiliated ownership. They were presented cards in order to keep track of foreign promotions that had brand images and associated knowledge in order to assist in procurement and in promotional management (Khaled 2010). Since McDonald’s mission is tied to promotion, Bangladesh is an environment that can dominate using advertising mediums that generally are constructed with new urban telecommunications developments as a competitive advantage. This is why the urban market is opportunistic as it carries many of the same elements of Western consumerist attitude. The socio-cultural elements of citizens in urban regions is also supportive of the rather standardized Western menu that has brought McDonald’s considerable sales success globally. Recent changes to law have outlawed mandatory adherence to the use of the female burqa and other traditional practices (bangladeshnews.net 2010) that have exhibited far more freedom in the country as an explanation behind new consumerist mentality. Though there is a small market of Hindu citizens, the majority follow Islamic belief systems. A typical meal in Bangladesh consists of beef/meat, vegetables, seafood and rice (southtravels.com 2010). These are common menu adjustments that have worked in China and other Asian regions, however very supportive of the Western standardized menu with favourite global products. The rural regions hold the majority of the country’s population, thereby through volume representing opportunities for sales achievement. For some, cattle are on the only real capital (Docksai 2010). McDonald’s maintains opportunities to invest in corporate social responsibility by involving cattle producers in their diversity and development programmes and making modified alterations to supply chain to support new market entry. Bangladesh is already receiving a great majority of its products from India, a country that has recently developed a more stable and efficient port system (portstrategy.com 2008). Market entry through this strategy would entail preliminary promotion of corporate social responsibility and familiarize local cattlemen and consumers with McDonald’s. Though a long-term strategy, entry in this fashion would dominate the Bangladesh restaurant market in a world where retailers and consumers are unfamiliar with brands by recognition alone. External and risk issues Inflation and pricing are relatively stable and in line with GDP for Bangladesh (Shahzad, Khiliji & Ahmed 2010). Bangladesh is an enormous opportunity for brand identification and the ability to price menu products according to reasonable profit margins based on exchange rates within the country. Bangladesh’s main goal is eradicating poverty through the increase of equitable income (Ahmad & French). It is a political system supportive of new business development and increased foreign direct investment. When in session, the national parliament is regularly broadcast (unctad.org 2000), therefore politics and the law as it pertains to consumers is well-known. There are no risks at the political level as the country is experiencing a period of stability between different opposing regimes. Other than trade tariffs and other import costs expected for foreign investment projects, risks are minimal in terms of political interference. In terms of marketing, one of the most primary functions of new business development in a unique and uncertain market is establishing positive reputation among target customer groups. This is usually accomplished through promotional activities, something that McDonald’s is familiar with in its European and Asian business models. Print media is not controlled by governmental regulators and exerts considerable freedom, however television and radio are under governmental control thus limiting some exposure potential for McDonald’s (unctad.org). The choice of media is dependent on what certain market segments have exposure to in their professional or personal lives. The telecommunications network is not well-developed in Bangladesh, therefore television does not represent a quality medium for expanding the McDonald’s name upon entry strategy chosen. If there is a need to send integrated marketing communications to customers in order to present product or quality offerings, print materials are the recommended method considering its liberal representation among consumer markets. McDonald’s has a very strong global business model that focuses on diversity in terms of employment. This is accomplished through diversity education curricula, employee business networks and partnerships with minority organizations (aboutmcdonalds.com 2010). Diversity in employment is one of the fundamental strengths of the McDonald’s HR model. There are opportunities that exceed risk in Bangladesh related to establishing a new employment model to assist in political objectives leading to reduction in poor and also to build new skills in a highly production-focused labour pool. In Europe, the brand works amidst concentrated competition in the fast food and traditional service restaurant markets, due to this, large-scale reimaging and renovation projects are included in innovation to change the ambiance and brand appeal for diverse customers. These represent high operational costs, however they are necessary in order to be seen as a flexible and modern food brand. McDonald’s will be operating in an environment where new Western models of employment can be established for low-skilled workers to assist leaders in building a more unstructured, horizontal leadership system used at a large multinational organisation. With a higher publicized focus on skills development and developing leadership, based on vision and mission principles, Bangladesh can serve a much broader corporate social responsibility objective prior to entry and post-entry after launch of operations. There is uncertainty in Bangladesh related directly to the consumer when considering their preferred buying behaviours. Consumers largest purchases in the country include food, clothing, medicine and education, in order of importance (Khaled 2010). This represents a market with a pre-existing standard for spending discretionary or disposable income on foods products amidst a market with very little competition from global players. Growth in mid-income lifestyle supports not only the standardized Western menu, but provides a willing market with a budget already geared toward foods purchases. After entering Bangladesh as a new operational environment, risk management tools are necessary as consumption patterns are very driven on social and economic development changes in the country (Khaled). Fluctuating consumer tastes and values associated with the socio-cultural environment will require interviews, surveys or questionnaires as measurement tools to identify with key elements of McDonald’s failures or successes in terms of product offerings and overall promotional strategy. The goal is not to reinforce McDonald’s as a localized product that is custom-tailored to unique demographic needs, rather to sell the product as a global brand ready to assist Bangladesh in developing a labour and supply infrastructure. Even though corporate social responsibility efforts are budget-sensitive, they are allocations within the existing budget that are already occurring across the world. By marginalizing the costs associated with local or international philanthropy and putting these resources into Bangladesh, McDonald’s maintains the ability to capture market presence early upon entry and maintain it to extend the life cycle as more and more competitors flood the market looking for FDI opportunities. Even though the primary religious affiliations in the country are Islam and Hindu, McDonald’s does not need to consider itself a temple, thus adding concoctions to the menu to feed niche market attitudes pertaining to spiritualism. Nothing in the literature identified a need for changing a tried-and-tested business model amidst a market with growing Western values in consumption and a diet that is supportive of McDonald’s traditional menu used internationally. By extending corporate social responsibility through new market entry as the key driver in labour and supply, McDonald’s will be opening new land distribution opportunities for further streamlining the European and Asian supply chain that is supported by improved port availability in India. There are international restrictions related to the import of beef, something that McDonald’s must consider in its supply methodology as part of operating a business in global society. By domesticating elements of the supply chain and including local cattle producers in this model, McDonald’s can control certain elements of competitor behaviour in terms of negotiating piggyback arrangements on existing Bangladesh distribution systems. This entry strategy is long-term and will impact McDonald’s over a three to five year period as new investments and local collaborations are established. The risk to this entry model is largely in terms of cost allocation, however the revenues expected by introducing a single operation in Bangladesh are not substantial unless there is a long-term benefit to the project. The country and its harvesting activities have also created a scarcity of fish products in Bangladesh (southtravels.com 2010). McDonald’s offers many different fish products in a market where this is considered an economic good, thus a genuine rationale for price hikes on fish products in relation to its availability in the supply chain. McDonald’s well established supply system includes import fish products, something that can serve profitability objectives and satisfy customers who do not necessarily have access to quality seafood products out of economic necessity. Through low-key promotion, the traditional fish sandwich can be a preferred seller to market groups that favour seafood in daily dietary intake. Conclusion McDonald’s has the opportunity for urban entry with a stand-alone construction or the ability to procure adequate retail space in the many shopping centres found in Dhaka or other major cities in the country. The most striking difference between Bangladesh and other Asian countries is the lack of need to create a wholly-unique and customized menu for these citizens since fast food and beef are regularly consumed. Rural entry would require creating the market availability by partnering with jobs collaboration efforts and involvement in the food supply chain. As identified, this is a very strategic entry strategy with significant long-term benefits. The secondary strategy is a stand-alone restaurant in Dhaka with virtually the same Western product offerings. In either strategy, McDonald’s has opportunities for advancing labour skills provision and making McDonald’s a local leader in recruitment, diversity and corporate social responsibility. These are fundamental aspects related to their business model and the company maintains the expertise necessary to drive these changes. With more focus on print advertising, Bangladesh consumers look willing and able to purchase McDonald’s products and there are no measurable barriers to entry imposed by externalities. With ongoing research studies in marketing and sales, changing consumer attitudes and trends will not represent uncertainty or risk after market entry. References Aboutmcdonalds.com. (2010). [internet] Diversity at McDonald’s – A culture of inclusion and diversity [accessed 19.11.2010] [available at http://www.aboutmcdonalds.com/mcd/students/mcdonalds_does_good/diversity_at_mcdonalds.html] aboutmcdonalds.com. (2010). [internet] What is McDonald’s Mission Statement? [accessed 19.11.2010] [available at http://www.aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html] Ahmad, N. & French, J. (2011). 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[accessed 18.11.2010] [available at http://www.portstrategy.com/features101/area-survey/asia/south] Shahzad, A., Khiliji, B. & Ahmed, I. (2010). Economic development: a comparative study on Pakistan and Bangladesh, Interdisciplinary Journal of Contemporary Research in Business. 2, 3, pp.249-263. Southtravels.com. (2010). [internet] Bangladesh culture [accessed 19.11.2010] [available at http://www.southtravels.com/asia/bangladesh/culture.htm] www1.mcdonalds.com. (2008) .[internet] McDonald’s Annual Report 2008 [accessed 19.11.2010] [available at http://www1.mcdonalds.com/annualreport/pdfs/full2008annualreport.pdf] Read More