Adjusting to Foreign Markets

It takes much more than a simple name change to integrate an existing product into foreign markets. Many established companies are attempting to expand their global presence by moving into new foreign markets, specifically emerging markets, but are finding it a much more arduous process than they initially anticipated.

The classic case study on this issue is the attempts by both McDonald’s and Burger King, Forbes #1 and #6 global fast food chains respectively, to expand into the French market in the 1980’s. McDonald’s opened its first French restaurant in Strasbourg in 1979 and has grown in popularity and market share ever since. On the other end of the spectrum, Burger King first opened its doors in France in 1981 only to end up closing its 39 stores in 1997. What caused these drastically different outcomes for two very similar companies?

The main difference between these two fast food giants was their respective responsiveness to the French customer. Burger King’s strategy was to directly transplant its American restaurants into the French market. McDonald’s also implemented this strategy initially, but quickly learned that it had to adjust its restaurants and menu to the French consumers' culture and taste preferences. From a menu perspective, McDonald’s began using French cheeses along with whole-grain mustard sauce to better appeal to the French palate.

McDonald’s also made several adjustments to accommodate French culture. Compared to Americans, the French tend to eat less meals outside the home, only 10% as compared to 40% in the U.S. The French also tend to snack less in between meals, which in turn leads to longer meals. McDonald’s adjusted to this cultural difference by gearing its restaurants more towards the dine-in experience. It also converted its restaurants to high end café’s (McCafé) at non-meal times to attract customers at all hours of the day. As a result of these cultural adjustments, the average French customer spends about $15 per meal, four times that of the typical American.

A final critical element in McDonald’s success is the company’s strong ties to French agribusiness. McDonald’s sources 95% of its produce in France and is the single largest purchaser of beef in the country. The remaining 5% of McDonald’s French produce is sourced from elsewhere in the European Union. This direct involvement in the domestic economy translated to a more positive perception of both McDonald’s food quality and corporate culture.

In the end, McDonald’s can attribute much of its success in France to its knowledge of the country’s culture and ability to overhaul its business model to better align with this culture. The lessons learned from Burger King and McDonald’s in the 1980’s and 1990’s in France are widely applicable in today’s globalized economy for companies attempting to expand their global presence.