CLU Business

McDonald’s Not So Flat World of Ads

Gerhard Apfelthaler — Sat, 09 Mar 2013 22:02:07 +0000

Ever since Thomas L. Friedman, Pulitzer Prize winning author, published “The World is Flat“, we have been listening to the mantra of the world becoming a completely level playing field for companies for many years now. Other authors such as Pankaj Ghemawat continue to remind us that we’re still quite far from a borderless world, and failures by both large, multinational companies and countless small- and medium sized enterprises are a great testimony to his position. Legal and administrative barriers continue to exist even in politically integrated areas such as the European Union, relevant economic differences between countries persist, and – probably most importantly – cultural differences are as a alive as they have ever been (as this blog tries to document). Looking at my collection of McDonald’s advertising from various countries, I was recently reminded again of two things: first, cultures are still having a strong influence over the marketing-mix; second, McDonald’s is doing a pretty good job at addressing these differences. Let’s have a look at this small selection of examples below. What we see on the first one is not surprising. We all know that religious beliefs make the marketing of beef burgers next to impossible in India; product adaptation becomes a necessity. McDonald’s has therefore added items such as the “Chicken Maharaja Mac” or the ”McAloo Tikki” to its Indian menu. So far so good. When it comes to promotion, the next example (second from the left) shows how McDonald’s is using a national celebrity athlete, basketball player Yao Bing, in its advertising in China. As is common in testimonial advertising McDonald’s tries to transfer the positive image associated with Yao Bing onto the McDonald’s brand. Being both collectivistic and highly status oriented, China very willingly accepts someone’s endorsement who is a source of national pride and has unparalleled athletic and commercial success. Doing this, McDonald’s is showing a lot of cultural intelligence. And now for a European example – Austria. As I have recently posted in a different context, Austria is a relatively risk-averse culture. As far as consumer behavior is concerned, this results in a preference for tested products, products that have third-party certifications, and traditional products that can be trusted. And which products could be trusted more than products of Austrian origin? McDonald’s has picked up on this and is very openly playing the country-of-origin trump card – 100 % beef from Austria, 100 % Austrian potatoes (second image from right), and using Austrian slang words that wouldn’t even been understood just a few miles across the border in Germany – “Pipifein” which means something like “Great” (first from the right). Well done, McDonald’s!

Management, Austrian-Style

Gerhard Apfelthaler — Tue, 19 Feb 2013 21:10:14 +0000

Over the past few years I have often been asked what the main differences in the workplace culture between my native Austria and the United States are. I still don’t have the perfect reply, but here are some observations. First and foremost, Austrians have a dislike for authority, particularly in the workplace. Austrians are well educated, they take pride in their work, and they think highly of their own skills. Therefore, they don’t like to be micro-managed – in Austria’s workplace, everybody is supposed to know what to do, how to do it and when to do it, and everyone wants to exercise that right. Viewed through a positive lens, this means that in most cases, Austrians don’t need anybody to breathe down their necks and can largely be left alone with a set of broad objectives in mind. When a supervisor becomes too directive, then employees will get frustrated. Unfortunately, and this brings me to my second point, disagreement with one’s superior is often not expressed openly in Austria. If managers don’t pick up on their employees’ dissatisfaction, the workplace could easily turn into a place that breeds a toxic culture of complaining and gossiping. And once that has happened, it’s hard to turn back the clock in any culture. The issue of not voicing one’s own feelings points to another important trait – Austrians’ need for consensus and (often false) harmony. In Austria, people don’t like to be direct. We often avoid speaking our honest opinion for the fear of being impolite (or maybe the fear of making a fool of ourselves). This is even reflected in Austrian’s use of German (or English…) as we tend to use a lot of passive voice, conjunctives, and the like. On the upside, this means that sticky situations that carry the potential for conflict are often resolved around conference tables rather than taken to the street. As a result (among others), Austria has one of the lowest numbers of labor strikes in the world – measured in minutes only. My next observation has to do with change. Change comes in many forms – for instance in the form of the introduction of a new management process, the adoption of a new software package, the hiring of a new (god forbid, foreign) manager from outside, or the simple disruption of daily routines, to name but a few. The negative attitude against such developments is easily explained through Austrians’ risk averseness. In Austria, children are brought up on children’s stories and proverbs that are sown with the same patterns all over: obedience and conformity pays, while rebellion and individualism are punishable. This certainly plays into the hands of those seeking group think and stability, but it doesn’t work well for those who want to reward individual initiative. Individual initiative is often suspicious to Austrians – not necessarily because we wouldn’t enjoy the rewards, but more importantly, because we don’t like to stand out and we don’t want to bear individual responsibility when things go wrong. When problems arise, mistakes are made, or failure occurs, responsibility is often and foremost believed to be “systemic” rather than individual. And finally, Austria is a land of traditional values. It is still a society that is dominated by masculine orientations in which men are engineers and women nurses and, unfortunately, where there is no gender equality in the workplace. It’s hard to find women in top positions in Austria, and women with equal qualifications earn about one third less of what men would earn in the same positions. Like in most countries, there is a divide between urban and rural areas, but by and large, men rule. The upside is that while Austrians like to keep work separate from their private lives, they are very performance- and goal-oriented.

I’m certain I have missed a ton of helpful observations, and I’ll keep working on the topic. In a future blogpost, I will also address how foreign managers can adapt their practices in order to succeed in Austria’s cultural environment.

PS to my colleagues: I don’t think I was included in my own sample!!!

Yum-my Chicken?

Gerhard Apfelthaler — Sat, 16 Feb 2013 18:14:37 +0000

As the English edition of the Chinese newspaper Renminbao (People’s Daily) reports, fourth quarter sales at Yum! Brands, the parent company of Kentucky Fried Chicken (KFC) and Pizza Hut have significantly declined. What has happened in the Middle Kingdom that not only has a huge love for chicken dishes, but also for foreign brands, a market that has been promising nothing but growth for the fast food giant? It all started out with a media report on China’s national TV station CCTV in December 2012. The broadcast alleged that some poultry farms, among them suppliers to KFC, ignored regulations by using hormones and antibiotics, and triggered unfavorable media attention and social media activity. An investigation by authorities in Shanghai only resulted in some vague recommendations concerning a strengthening of KFC’s supply chain, but no fine was assessed and no further action was taken. Unfortunately, as is often the case in such circumstances, the good news got much less media coverage than the original bad news. And so the Chicken scare started to nest in the minds of the Chinese consumers. As the Economist reports in its February 9th issue, KFC’s January sales in China fell by a dramatic 41 %. What makes this even worse is the fact that Yum! doesn’t operate under the usual franchise system in China, but owns most of its stores. With currently approximately 5000 restaurants in 800 Chinese cities, this is a costly development to digest – probably worse than eating a big bucket of deep fried poultry. KFC’s example just shows how tricky it can be to operate in far-away markets. Cultural, geographical and legal distance make it very difficult to first perceive and interpret the early warning signals correctly and then to react quickly and appropriately. Often in such cases, foreign companies quickly pick up the stigma of being an imperialist monster that has no respect for the local environment and whose only interest is exploitation of the local market. Or, in this case in the words of the Economist, to be the “Yucky Kentucky”!

Evaluating Pre-Leadership Decisions

Bruce Gillies — Mon, 04 Feb 2013 17:41:31 +0000

Recently we have seen a significant leader lose their credibility due to decisions that were made prior to their becoming a leader. This happened not only once, but in several instances where the history of an individual has come back to haunt their legacy even though their current performance is well above the norm. Lance Armstrong recently apologized for his use of banned substances during his bicycle racing career. His legacy was 7 consecutive wins of the Tour De France bicycle race, a grueling 21 days of racing bicycles 1500 to 3500 miles. During his bicycle racing career Lance Armstrong was diagnosed with cancer and given less than a 40% chance of survival. Not only did he survive, but his comeback to bicycle racing is legendary. After his retirement he founded the Lance Armstrong Foundation which raised approximately $470 million dollars in support of people who are affected by cancer.

Recently, after a several years of denying the use of banned substances, Lance confessed to using them while on the Oprah Winfrey show. The immediate and drastic outlash at this confession rocked the Lance Armstrong foundation to the very core, with many individuals withdrawing from their supporting stances and in some cases outwardly and publicly decrying the value of the organization.

The leadership that Lance Armstrong provided the Armstrong foundation with was all after his use of the substances. He did it in spite of the cancer and banned substances.

The question lingers, should leaders, highly effective leaders, be seen as any less effective for something that happened prior to their assuming leadership positions? Or is it the credibility of a leader that is at the very heart of their leadership effectiveness?

Global retail: another failure…

Gerhard Apfelthaler — Mon, 17 Dec 2012 04:43:48 +0000

Yes, the British are leaving the United States – again. After a $1.6 billion investment, British supermarket giant Tesco announced that it may be selling it’s US “Fresh and Easy” chain. Clearly, corporate PR speak for “we are pulling out of the United States altogether”. What has happened to Tesco, which successfully operates more than 6,000 stores worldwide? On the surface, the promises of convenience and tasty, freshly prepared food sounded great, but what US customers experienced was less “Fresh and Easy” and more “Small and Strange”. In the eyes of American consumers, the stores had a limited product range (terrible for a country where the pet food aisles are often better stocked than entire supermarkets in Europe), a selection that was uniform irrespective of the neighborhood of the store (watercress salad in South Los Angeles…), unfamiliar British fare instead of the ubiquitous American brands (Marmite, seriously?), too much packaging (in a country where we want our sandwiches on sourdough, toasted on one side with non-fat mayonnaise and chopped tomato – not sliced – Dijon on the upper half, and Pepper Jack, not Swiss), and – worst of all – it made customers do their own check out!

So, it’s really the old story of standardization versus adaptation and finding the right balance between protecting the efficiencies of a proven business model and adapting it to the environment of the target market. Yes, there is a tremendous amount of change in the supermarket landscape in the US that invites new concepts and experimentation, but you certainly can’t just bomb drop an entirely new concept into a market that is as competitive as, for instance the Southern Californian. You need to get the word out, listen to consumers, and slowly educate them, instead of alienating. But then again, if the entire economics of a business model are built around a standardized approach, then the only choice a company has is simply not to enter a culturally distant market. Or leave, several years and $1.6 billion later. Even if you’re a huge company such as Tesco.

Here we go again: Wal-Mart in India

Gerhard Apfelthaler — Sun, 09 Dec 2012 17:46:19 +0000

This week, the two houses of the Indian parliament have decided to finally and fully pave the road for foreign direct investment in the country’s retail sector. Long awaited, and heavily disputed, this measure opens the sector to foreign retailers who have been waiting at the doorsteps of one of the largest consumer markets in the world. Until recently, only partial ownership has been allowed which didn’t prevent some retailers from tipping their toes into this foreign land. As important as the passing of the legislation has been, it shouldn’t distract from the fact that there are many other barriers to overcome than just the formal barrier of the law. As, I’m certain, US retail giant WalMart, which entered the Indian market in 2007 under a joint venture with the Bharti Group, can confirm. Originally, foreign companies including Wal-Mart’s joint venture were only allowed to operate wholesale stores. Based on recent changes in the law retail stores came within reach, and Wal-Mart announced that it would expand over the next few months. Now, in India’s bureaucratic culture, expansion can be cumbersome. Often, because of the burgeoning bureaucracy and the overlapping of federal, state and local laws, fifty or sixty different permits may be required before the opening of a store is approved. The suspicion is that the expansion train was going too slow, so that some Wal-Mart employees started to grease the tracks. An Indian government agency called Directorate of Enforcement therefore has been investigating Wal-Mart on suspicions of such corruption. Even before that, Wal-Mart had already suspended a number of employees, potentially including its CFO in India based on investigations related to the US Foreign Corrupt Practices Act. The fact that Wal-Mart started similar probes in Mexico, Brazil, China and India shows that blaming entire countries or cultures for corruption may only tell one side of the story. It always takes one to take the bribe, and one to pay the bribe. Implicitly or explicitly, employees must have felt a certain pressure to speed up the process, to please their bosses, or to bring results so that they can get the raise and the promotion. This case also shows that entering mature or developed foreign markets is difficult enough, but when it comes to emerging markets or developing countries, the differences in local practices can often create severe difficulties even for the best companies and the most skilled employees. Strategies that fit Western, industrialized nations, don’t necessarily fit emerging markets, and therefore need to be adapted carefully.

Automotive Branding Gone … Mild

Gerhard Apfelthaler — Wed, 03 Oct 2012 14:03:41 +0000

Yes, we’ve all heard the story about the Chevrolet Nova (not true as I have reported on this blog earlier), the Mitsubishi Pajero, the Mitsubishi Colt and other car models. However, behind those obvious and funny stories of branding blunders, there’s also some cultural richness and subtlety to explore. Have you ever thought about the names US car manufacturers brand their cars with? Ford EXPEDITION, Jeep PATRIOT, Lincoln NAVIGATOR, Dodge CHARGER – the list is endless. All of these names are more than just inventions of overly creative marketeers. They stand for something, and they provide identity. They’ve been chosen to describe the essence of the model, but also because they address some deep emotional needs of customers in the target group. To most customers in the United States, EXPEDITION stands for something positive, and so does PATRIOT or CHARGER. These are culturally loaded names for car models that conjure some of the positive values that most Americans have grown up with – individuality, initiative, responsibility, competition, to name but a few. Now stop and think about German car models (and, for the sake of the argument, let’s leave Volkswagen out of the equation for a moment). Mercedes has the A-class, the B-class, the C-class and so on. And when they go really crazy, those jovial Germans come up with the G-class! And BMW? They have the 1-series, the 3-series, the 5-series… You get the idea. Now what do these tell us about German cultural values? Germans value ideas such as structure, order, hierarchy, logic, but also the perfection of engineering that is buried in the numbers and letters. The big mystery of course is why do Americans then still like German luxury cars? Maybe it’s the lure of the exotic, maybe it’s that model names aren’t the most important factors in the purchase decision, or maybe it’s just one of those inexplicable paradoxes of culture.

Another one bites the dust (not quite yet)

Gerhard Apfelthaler — Wed, 26 Sep 2012 22:58:02 +0000

Not too long before US-based DIY giant Home Depot announced it’s almost complete withdrawal from China, similar news emerged about Europe’s largest home improvement retailer, Kingfisher PLC. Kingfisher, founded in 1969, which owns the B&Q and Castorama brands, operates close to 1,000 stores in eight countries including Britain, Ireland, France, Poland, Spain, Turkey, Russia and China. Kingfisher has been struggling in most countries, but it’s China troubles seem to be of a different magnitude. Ever since it first entered China in 1999, it has been uphill for Kingfisher in the Middle Kingdom. When losses hit more than $ 80 million, B&Q decided to cut the number of stores by 22 in 2009. Realizing that the “big box concept” is not very appealing to the Chinese market, it also downsized operations for its remaining 40 stores. As has become apparent in the recent Home Depot case, B&Q may be struggling with exactly the same difficulties – the fact that for cultural and economic reasons, the entire DIY concept is too foreign to most Chinese consumers. And for those who like the idea of tiling their own bathrooms and flooring their own living rooms, there is a plethora of local alternatives in a highly fragmented market. After all, brand is not as important in the DIY segment as it is in more visible FMCG categories. All in all, another case of the difficulties associated with the internationalization of retail businesses.

Home Depot Packs Bags, Leaves China

Gerhard Apfelthaler — Mon, 17 Sep 2012 20:46:15 +0000

Late last week, US-based home improvement giant Home Depot announced that it would take a $ 160 million after-tax charge and close seven of its big-box home improvement stores. Home Depot entered China with high hopes in 2006 when it acquired 12 stores across China. Over the years it had reduced the number of stores to the seven it is now closing. Home Depot, which of course also sources heavily from China, does have plans to keep two speciality stores in the city of Tianjin and also to be active in online retail, but for now the dreams of making it big in a market of more than a billion consumers are over. While it is true that many retailers in China are currently struggling as slow economic growth is curbing consumer spending, the roots of Home Depot’s failure may be somewhere else.

The first reason may be that China is not so much a Do-it-Yourself (DIY) culture, but more of a HIDBO (Have-it-done-by-others) culture. Cheap labor is abundant, but even more importantly for a culture that values status and prestige, tiling your own bathroom or painting your own window frames is not necessarily a desired activity for the masses. You may ask why it then is that IKEA is hugely successful in China – a company that also makes you assemble your own furniture. The answer leads us to the second reason behind Home Depot’s failure. Chinese are looking for guidance in acquiring Western lifestyles. IKEA provides this guidance by showing their customers how to decorate their homes in a Western fashion. The fact that you have to assemble your own furniture is a little more appealing when you know what the final product is supposed to look like. Besides, there’s always someone to assemble your IKEA furniture for you. Home Depot, however, leaves consumers largely alone and guessing about the final look and feel. Also, most Chinese live in small apartments and don’t have the room to keep tools or work on DIY projects. And ultimately, Home Depot is selling commodities – nails, screws and paints aren’t necessarily the same cultural icons like IKEA, McDonalds or KFC that so many Chinese middle class families are looking for. There may also be a third reason. Generally, as has also been featured in this blog, retail somehow doesn’t travel easily across international borders. But that’s for another time.

FIRE AND ICE: Seven skills that every leader needs

Bruce Gillies — Wed, 29 Aug 2012 18:16:56 +0000

Many books and studies have been written about leadership. Indeed, it may well be THE most studied phenomenon in business. Most of the studies and books seem to focus on the upper echelon of leadership, the “C” level. While what is needed is common sense leadership tips for first-time and front line leaders and supervisors, often called “managers.” We know that leadership and management are different skill sets. Managers manage “things” (even when those things are people) and leaders “lead” people. What I’ve found in my 25 years of studying leadership behaviors, been through hundreds of hours of leadership training (military and civilian), and conducted several leadership studies is that there are key elements, F*I*R*E and I*C*E that contribute to solid leadership development at an early stage in any leaders career.

In the following series of blog entries, we’ll be taking a look at the various pieces of the FIRE and ICE leadership model. The terms FIRE and ICE stand for:

F- Focus

I- Intensity control

R- Relationships

E- Execution of tasks

I – Integrity

C- Compassion

E- Engagement

I use the terms FIRE and ICE because they seem to be two ends of a leadership toolkit. On one end is FIRE, the heat and working end of the leadership situation. While on the other end is ICE, the cooling down and tempering of the leadership situation.

The most important key, just as in the use of any craft, is to know which tool to use and when to use it. The “right” tool used at the wrong time will result in damage to the item being worked on, in this case subordinates, or destruction of the tool. Imagine trying to use a hammer when a screwdriver is called for. Let’s take a quick look at these seven elemental skills of leadership:

F- Focus. Leaders need to know how and what to focus on. Focus is the key to any endeavor. Knowing how broad or narrow of a focus can lead to excellent results when used in combination with the other tools. However, focusing on the wrong area, regardless of the quality of the other tools, will result in a detrimental outcome. Focus for leaders means knowing whether to focus on an individual or on an issue. Focus on strategy or damage control. The narrower the focus, the less potential distractors, but also the reduce ability to see elements from outside that may be impinging on the situation. Using a magnifying glass analogy, too close or two far of a focus distorts the image and does not get you a clear view of the real problem.

Let’s take a look at a situation that resulted from the correct focus.

Jane was very excited to get to work. Today was her first day at work after her promotion. Only 2 years as a customer service representative and now she was the supervisor for 20 others, some of who had been with the company for 5 or more years. Jane wondered how they would treat her since just yesterday she was a peer and today she is the boss of the people she worked right next to.

The first few hours at work were great. Colleagues congratulated her on the promotion and her new workstation seemed to be functioning just fine. All was in order,,,until Jim stopped by. “Ummm, congratulations on the promotion,” he offered, “can I talk to you about something?” “Sure!” Jane replied, eager to start showing off her leadership skills. “Well, you see, it looks like I have a REALLY angry customer on line 12. I don’t think I handled it right. They want to talk to my supervisor.” Jane grimaced. Resolving angry customers was something she was good at, but did not particularly enjoy. “Ok, I’ll take care of it” Jane answered. After resolving the customer complaint, which actually stemmed from Jim’s providing wrong information about returns, Jane called Jim back to her desk and asked him exactly what happened. “Well, they started out really mad and then they started saying how much they disliked our company and saying some really rude things. I guess I kind of lost it.”

“Well, Jim, let’s go back and listen to the recording and see what we can do about helping you deal with these kinds of customers.”

In this case, Jane was able to focus on the actual issue and not come down on Jim. Since this was the first time it happened during Jane’s supervisory term, Jane didn’t have much background, but now will be able to further focus on developing Jim. She knows that she can’t fix EVERY situation like this and that providing Jim with the knowledge, skill, and confidence he needs will empower him to respond more appropriately and be more productive. Jane focused on the right thing and at the right level. She could have simply focused on Jim’s inability, or the specific situation, but she was able to adjust her focus to the appropriate level.

Understanding the correct focus level can take some skill. But knowing that you sometimes need to adjust the focus to ensure you get the big picture as well as the details is an excellent step on the way to ensuring YOU focus with clarity and detail.

Bruce Gillies, PsyD, MA, MS

Assistant Professor, Chair of Organizational Leadership California Lutheran University