What is McDonald’s Strategy in China?

by Alex Duncan  |  July 3, 2011 – 3:52 pm

Buzz

Just what is the big M up to in China. In a reversal of their US fortunes they lag far behind their rival KFC largely due to the fact that Chinese people prefer fried Chicken to Beef Burgers. On one hand they are adapting to Chinese consumers, in 2009 McDonald’s introduced a couple of new chicken options which rapidly became some of their most popular items. On the other hand their stores seem to be undergoing some kind of wolf in sheep’s clothing cum Starbucks knock off transformation and there are clear signs it’s not really working.

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I’m certainly not a regular customer, my intermittent visits are usually a needs must affair. As a casual observer, over the past few months, I have noticed a concerted remodeling of the familiar gaudy stores into much more sleek McCafé joints, complete with faux wood decor and gleaming brushed stainless steel bean to cup coffee machines (and jaunty jazz tunes). What at first seemed an isolated trend seems to be slowly rolling out across all stores. From a personal perspective I’m all in favour the coffee is drinkable and cakes definitely preferable to the usual borderline indeterminate processed fayre.

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What is universally common to these made over stores is the deserted coffee counter. While the fast-food lines bustle with customers the (often more prominently positioned) coffee counter sits idle. Dozens of customers buy the far inferior drip coffee from the main counter, wouldn’t it make sense to integrate the two (I’m sure McDonalds tried this). The times I’ve used it there usually isn’t enough money in the till to offer me change and the staff seem unfamiliar with the equipment as if actually operating it is a rare novelty.

After my, rather rambling, setting of the scene I can’t help but wonder what McDonalds is playing at. Huge investment is going into these stores, staff and equipment that is currently almost completely unused. Did they do some kind of blue sky research that told them this is what consumers wanted? Are they playing a long game, will western coffee culture eventually become ubiquitous in China? Or is this some kind of window dressing/loss leader which distances McDonald’s from it’s cheap and cheerful rivals. Making it seem more up market and allowing it to add 1元 to all prices? I’m genuinely fascinated as to how this strategy was derived and why store after store is being converted with no obvious sign that this approach is successful. I’m usually inclined to believe these huge corporations have some greater insight I’m unaware of, but this time I think they might just have got it wrong. It definitely isn’t a sure fire strategy for taking on the likes of KFC.

In the entire hour I’ve sat here in McDonald’s on 西安路 here in 大连 a grand total of 2 people have bought coffee from the McCafé counter. If the girl spends any more time wiping the counter she’ll doubtless erode it away.

I’ll just keep wondering and Ronald if you’re reading this feel free to chime in with a comment.