MCDONALDS.CASE.STUDY.BRESIL

by

CLOÉ GUÉRIN
DIOGO PINHEIRO
NINA IRAUNDEGUI

INTERNATIONAL MARKETING - PATRICIA SIBELLA

MASTER LAI - LANGUAGES BUSINESS & INTERCULTURALITY

McDonald’s Case Study

2

S u m m a r y
Questions ________________________________________________________________________________________________ 3
Introduction ______________________________________________________________________________________________ 4
McDonald’s Organization __________________________________________________________________________________ 5
McDonald’s Values ________________________________________________________________________________________ 7
Differences between American and Brazilian Values ___________________________________________________________ 9
McDonald's Business Conduct _____________________________________________________________________________11
McDonald's Target Group in Brazil _________________________________________________________________________12
McDonald's Strategy in Brazil ______________________________________________________________________________13
McDonald's Competitive Strategy in Brazil __________________________________________________________________14
American Management Style in Brazil_______________________________________________________________________17
Conclusion ______________________________________________________________________________________________18
Sources _________________________________________________________________________________________________19
Table of Figures _________________________________________________________________________________________21


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Q u e s t i o n s
International Marketing - M1
McDonalds case study
You have to find general information about the company and answer the following questions. All questions are equally
important.
Remember to list your sources at the end of the report (Pages 18 and 19)
1 - Analyse and describe the organization of McDonald’s. (Pages 4 and 5)
2 - Describe and analyse the values of McDonald’s. Are there any differences between the American values and the
values in the specific country you intend to open up a new McDonald’s fast food restaurant (you are free to decide
upon the country)? Analyse the differences in the two national cultures. (Pages 6, 7, 8 and 9)
3 - Do McDonald’s always follow their values? Give examples. (Page 10)
4 - Describe McDonald’s target group in the specific country you have chosen. (Page 11)
5 - Discuss the key factors contributing to the success of McDonald’s positioning strategy in your chosen country.
(Page 12)
6 - Using Porter’s Five Forces Framework, discuss the competitiveness of the market McDonald’s is competing in, in
your chosen country. (Page 13, 14 and 15)
7 - Imagine that you are an American supervisor at McDonald’s. You are to establish a McDonald’s in the country you
have chosen. What kind of management style/leadership would you use and how will you motivate the employees as an
American in the other country? (Page 16)


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I n t r o d u c t i o n

Founded in 1940, McDonald's is today the biggest fast food chain in the world. Today, the firm is a giant in the
restaurant sector and have created a powerful and recognizable worldwide brand. Their success is based on their
various strategies such as innovative products and tastes but also their adaptation to targeted countries. Today,
McDonald's has opened more than 35 000 restaurants in 119 countries that reflect its huge success. Since 1993,
McDonald's has also opened a chain of subsidiaries called “McCafé” which serves mostly coffees but also cakes.
For our case study, we have chosen the example of McDonald's in Brazil, because of its large success in the
country. We will manage to analyse how McDonald's has broken into the market and how they did adapt their concept
to Brazil, which has a specific culture different from the US one.
Brazil is the largest country in South America covering 50 per cent of this sub-continent. The country shares
common boundaries with all countries on the region except Chile and Ecuador and is known as a continent-country
because is the fifth-largest country in the world, after Russia, Canada, China and United States. Brazil extends over 3.3
million sq. miles and is divided into five geographic regions with distinct topographic, cultural and economic
characteristics. It’s also the fifth-largest population with more than 200 million people.
Brazil’s ethnic composition is mainly European, African and Indigenous,
although, much like United States, Brazil is a nation of immigrants and communities
of Asian, Middle Eastern and European descendants. The official national language
is Portuguese, making it the eighth most widely spoken language in the world.
Brazil’s official religion is Catholicism but other religions, including Protestants and
Afro-Brazilian cults are also represented.
The climate in Brazil is mostly tropical, but in the south is temperate. In the north, the temperature remains
around at 32°C during almost all the year. In the Southeast regions of the two biggest cities of the country - São Paulo
and Rio de Janeiro - it gets that hot in the summer and in the winter, temperatures can decline to between 13°C and
5°C. In the south, temperatures can to dip below freezing in mountainous regions.
Brazil is Latin America’s largest economy and ranks among the world’s seven largest economies, with a GDP of
around US$2250 billion1
. It is one of the rising economic powers with other nations as Russia, India, China and South
Africa. The economies of these five countries are collectively called BRICS and are promising emerging markets by their
demographic and economic potential.
Social policy and economic changes transformed Brazil during the two last decades. The drastic social change
and the sharp increase in economic growth have been made Brazil one of the word’s most important markets for global
industries. Inflation, poverty and unemployment levels decline historically and help redefines Brazil as an emerging
middle-class country that represents a massive opportunity for McDonalds restaurants and franchises.
But to open up a new McDonald’s fast food restaurant in Brazil or in any other country is elemental to establish
a Business Plan guide. This Business Plan provides details of this new project and includes the information from
planning of production, management, marketing and financial areas. One of most important parts of the Business Plan
is the intercultural aspect of this new market. In the International Marketing Plan section is required outline the cultural
values of the country where the company aims to expand. Them highlight and analyse these cultural differences to
adjust the Business Plan.

1
Brazil GDP in 2014, according to World Bank Group.
FI G U R E 1: BRAZILIAN FLAG


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M c D o n a l d ’ s O r g a n i z a t i o n

McDonald's is famous for their unique management. On each restaurant, each employee is affiliated with a
specific task or role: a general manager helped by a rest manager and a 1st and a 2nd assistant manager supervises
each restaurant. Then comes a shift running manager, a floor manager, a staff training crew and finally employees. This
hierarchy basically allows staffs to work on their own tasks but also in the same time to be in direct link with a superior
manager which will relay on a higher figure if needed, which allows easier communication and create a friendly climate
between workers
FI G U R E 2: MCDONALD'S CORPORATE ORGANIZATIONAL STRUCTURE DIAGRAM


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On a higher and international level, in order to control its franchises overseas, McDonald's have
representatives for each continent and country that are under CEO direct control. For the US, they even have divisions
in for each region. It allows McDonald's, with help of direct local partners, to break into different markets that all have
specific characteristics.
Figure 3: MCDONALD'S REPRESENTATIVES STRUCTURE DIAGRAM

Moreover, McDonald's manages its restaurants under 3 different types business models: franchise, affiliate or under the
corporation itself. Under the first two types, they are seen as suppliers, which will sell McDonald's products under their
name in exchange of fees and royalties coming back to McDonald's. These models are mostly used when the brand
wants to expand overseas and want the help of locals. Also, the corporation itself can also open new restaurants with no
exclusive partners.
To sum up, McDonald's organization is well managed on each restaurant with a universal management and
strict hierarchy to provide a high-quality service that will meet consumer’s expectations and create satisfaction


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M c D o n a l d ’ s V a l u e s

McDonald’s values are based into 7 mainly dimensions and are defined by a set of relationships and strategies:
Figure 4: MCDONALD'S VALUE-DRIVEN STRATEGY
- Customers:
“We place the customer experience at the core of all we do”
McDonald’s place the customer in the centre of the diagram. That means the most important value for
McDonalds is the value that it holds for its customers. The company focus on the QSC&V (quality,
service, cleanliness and value) grading system to assess the standard of its restaurants and provide a high quality
food and service.
- Employees:
“We are committed to our people”
McDonalds provides possibilities of a progressive career for all employees independently of age, gender, race
and/or academic level. The company believe in supporting, empowering and valuing its employees offering equal
opportunities, trainings, benefits and all tools they need to succeed professionally.


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- Suppliers:
“We believe in the McDonalds System”
McDonald's suppliers are required to adhere to the strict McDonald’s Supplier Code of Conduct to ensure that
its restaurants are selling products of quality. Suppliers have to certify their compliance annually. The company believe
in the importance of building strong relationships with suppliers and are expected to uphold similar principles outlined
in the Standards of Business Conduct for McDonalds employees.
- Ethics:
“We operate our business ethically”
McDonalds focus in high business ethics and manage its business plan with high ethical fairness, honesty and
integrity model for all its customers and suppliers. The company protect its reputation and prevent employees about
the improper or unlawful use of the brand’s name.
- Communities:
“We give back to our communities”
The company is involved in in various charities, supports education in countries where has its franchises.
McDonalds also sponsors several numbers of sportive events in the world as the Olympic Games and Soccer World Cup
and children programs involving education, eradication of illiteracy and poverty especially in countries of Asia. An
example of engagement of the company with social responsibility, especially children’s causes, is the fund collected by
all restaurants destined to Ronald McDonald House Charities (RMHC). Others McDonalds engagements are with
environment, health and sustainability. In Brazil, McDonalds has relationship with local organizations to transform used
cooking oil into biodiesel.
- Profit:
“We grow our business profitably”
McDonalds is engaged with Fair Competition and Antitrust laws in countries where operates around the world.
The company promotes fair competition respecting the rights of competitors and suppliers and offers for shareholders
sustained profitable growth.
- Improvement:
“We strive continually to improve”
McDonalds cooperates with authorities and governments and takes allegations of misconduct very seriously
and if necessary put in place internal investigations and an audit committee to investigate all illegal practice.


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Differences between American and Brazilian Values

A nation’s culture, or its people’s way of life, guides the values, practices and values of the people living in it.
“Culture is a pattern of shared basic assumptions that a group learned as it solved its problems of external adaptation
and internal integration that has worked well enough to be considered valid, and therefore to be taught to new
members as the appropriate ways to perceive, think, and feel with relation to those problems”.
While it’s true that Hispanics make up the largest segment of the immigrant population in the United States,
but Latinos aren’t a monolithic group. Recognizing the similarities and differences within cultures is extremely important
when conducting business in a foreign country. As a Latin American country, Brazil has its particularities if compared
with other Latin countries that make Brazil such as an “island” in the region.
1. Social organization:

- Family ties: Family ties are stronger and broader in Brazil than in United States. In the United States family usually
consists of one’s parents and in Brazil, family tries are equally strong for kinship relationships. Brazilians as a whole look
more or less favourably on the practice of nepotism. In Brazil, loyalty is generally more highly valued than in United
States.
- Gender roles: Gender is more clearly differentiated in Brazil than in the United States. For example, gender-based
etiquette is not a sign of sexism but of good upbringing and in the United States social norms tends to be ignored in
the work place. The result may make some U.S. businesswomen suspect sexism where none was intended. In general,
many U.S. business people avoid gender-based etiquette.
Dress is also highly differentiated between men and women in Brazil. Many Brazilians give considerably more
attention to make-up, for example, and women's business attire tends to emphasize femininity in a different manner
than U.S. businesswomen's attire.
- Class Stratification:
Brazil has the greatest inequity of wealth distribution of all major economies and make the
mean difference with the United States. But, as the two largest multiracial societies in the Americas the legacy of slavery
makes a racial inequality in both countries. In Brazil 45% of non-white families and 25% of white families live below the
poverty line. In the United States, 30% of non-white families and 8% of white families live below the poverty line.
- Regionalism: The United States and Brazil are the third and fifth largest countries in the world. This characteristic
makes both countries more similar in this aspect. New York and São Paulo are the financial capital. While, Washington
D.C. and Brasília D.F. are respectively the administrative capital of the United States and Brazil. The Interior represents a
vast non-coastal territory, the population density in these areas is not very high and both countries have several
numbers of metropolitan areas with cities with more than 1 million people that are, generally, the capital of a federative
state.
- Race and Ethnicity: Regional identities are not the only associative divisions in Brazil. Brazilians view themselves as
a mestiço society, a blend of cultures. Brazil's former slavery heritage endowed the nation with a rich African heritage.
Afro-Brazilians confront considerably less of the racism that characterized in the United States that was also historically
involved with the slave trade. Most Brazilians pride themselves on the country's racial equality. Indeed, because of the
high degree of interracial marriages throughout Brazilian history, racial lines are often not clearly differentiated.
- Religion: In Brazil 97% of adults identify with a Christian religion. Almost 90 per cent of Brazilians are Catholic that
makes Brazil the largest Catholic population of any nation in the world. Catholic holidays, consequently, affect Brazilian
work schedules and are widely celebrated. Despite the importance of the Church, however, many other religions
influence Brazilian society. In the United States, 77% of adults identify with a Christian religion, including 52%
Protestant, 23% Catholic, and 2% Mormon.


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2. Business cultural dimensions:

This chart describe the vast differences between both cultures:
Business Cultural Differences:
Brazil v. United States
Uncertainty Avoidance High Low
Power Distance High Low
Collectivism v. individualism Collectivism Individualism
Masculinity v. Femininity Middle Masculinity
Long-Term v. Short-term Middle Short-term
Performance Orientation Low High
Assertiveness Middle Middle
Future Orientation Low Middle
Humane Orientation Middle Middle
Institutional Collectivism Low Middle
In-Group Collectivism High Low
Gender Egalitarianism Middle Middle
Power Distance Middle Middle
Uncertainty Avoidance Low Middle
Material Wealth Medium High
Achievement High High
Time Medium High
Change High High
Subjectivity v. Objectivity Subjective Objectivity
Family High Low
Authority High High
Trust Medium High
Fatalism Medium Low
Monochronic v. Polychronic Polychronic Monochronic
High v. Low Context High Low


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M c D o n a l d ’ s B u s i n e s s C o n d u c t

One of McDonald’s value is ‘We operate our business ethically’. They emphasize that the company defend
some principles such as ‘fairness’, ‘honesty’ and ‘integrity’. Nevertheless, some revelations from employees, inquiries
prove that McDonald’s is not as ethical as it claims.
McDonald’s also claims that they are “committed to our people”, but in January 2015, workers sued the fast-
food chain for discrimination. The plaintiffs, nine African-Americans and one Hispanic accused McDonald’s of firing
them because of their race, and being replaced by white workers. One of the managers responsible for the dismissal of
the workers complained that “there were too many black people [working] in the store”, this store described as a
“ghetto store”. They were also accused of dropping black people from the payroll because they said the store was too
dark. This restaurant do not belong to McDonald’s, as it is a franchise own by Soweva (Michael Simon), so the main
problem of that trial is: who is responsible and have to answer for that accusation? McDonald’s, who does not want to
be holding responsible to the dismissals, said that they give a lot of independence to the franchises, leaving them the
day-to-day operations. So according to this franchise model, Soweva, the owner of the restaurant, is the one and only
to be guilty. But the plaintiffs argue that, even though the restaurants do not belong directly to McDonald’s, it bears its
name, and thus have to respect the engagements and values of the parent company. They also claim that after being
fired, they first requested help to McDonald’s corporate to get back their jobs, but the company did not help them and
simply recommend them to tell their demand to the franchise, the one that just fired them.
That case shows us that McDonald’s does not necessarily respect its values. Even if it affects a franchise,
McDonald’s has the responsibility to make sure that their principles are used and respected. A dispute in which a
McDonald’s franchise is involved is compromising for the company.
Another value of McDonald’s is “We place the customer experience at the core of all we do”, which imply,
among other things, a “high quality food”. But a tainted meat scandal in China tends to prove the contrary… Shanghai
Husi Food, a food processing plant supplier of McDonald’s and other fast-food restaurant in Asia has proved to use
tainted and expired food, in appalling hygiene conditions. A reportage secretly filmed shows employees working
without any protection, using also meat that fell on the floor and change the expiration dates of already expiring meal.
All other restaurant brands stop doing business with Husi, except from MacDonald’s, who choose a new Husi food
processing plant in China, described as “state-of-the-art” by OSI Group, the American parent company of Husi.
Surprisingly, MacDonald’s and other chain restaurants were not sued for serving “foul” meat. But MacDonald’s broke its
first commitment; it has worked for 22 years with Husi, without realizing that they provide it with tainted food.
Controlling the quality of the food and the hygiene of their supplier should be one of their priorities. Moreover, they
decided to carry on working with the group, despite this appalling discovery. With this scandal, they surely have lost the
confidence of many customers, and ought to reassure them.


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M c D o n a l d ’ s T a r g e t G r o u p i n B r a z i l

In a country like Brazil, where culture, and especially food culture, is very different from the U.S.’s, McDonald’s
main target group are the youth, which are more open-minded towards western food and to taste new products. In all
the countries they are settled, McDonald’s chose to keep its more emblematic products, but also try to adapt some,
and create new menus to fit the country’s culture. To adapt to the Brazilian market, they changed the breakfast menu,
serving only coffee and a light roll. They also decided to offer high quality fruit juices, such as traditional juices with
tropical fruits, guaraná, maracujá, cajú… at every hour of the day, because Brazilians are big consumers of fresh fruit
juices. Brazilians can also find Pão de Queijo (Cheese Bread), which is sold in Brazil only.
McDonald’s Brazil also plans to target middle-class population. Middle-class is the biggest in the country,
accounting for 54% of the population. In Brazil, the population is divided into five classes, from A, the highest, to E, the
lowest. The middle-class corresponds to the C class, and is developing for the last years, and they are becoming the
most important potential target group for McDonald’s. “The ascension of the classes B and C increased the demand of
this type of service”, said Marcus Rizzo, a specialist in franchises.
They also want to spread all over Brazil, by opening new restaurants in mid-sized cities (cities of 80,000
inhabitants). This decision does not mean that the big cities’ market is now saturated, but that McDonald’s wants to
expand all over the country. The restaurant plans to settle in interior regions, including Rio Branco, Macapá and Boa
Vista, region’s capitals, which have not a McDonald’s yet. Because of the development of urbanization in those mid-
sized cities, people cannot come home for lunch to eat at home. McDonald’s then wants to target this specific group,
and wants to choose a good location so that working people can go easily to its restaurants at lunch time. There are
about 350 cities of about 80,000 inhabitants all over Brazil, and for the moment, McDonald’s is present in only 150. The
opening of new restaurants in those cities will involve the recruitment of 4,000 new employees, in addition to the
50,000 already working at McDonald’s
FI G U R E 5: MCDONALD'S ADAPTED PRODUCTS IN BRAZIL


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M c D o n a l d ’ s S t r a t e g y i n B r a z i l

McDonald's has successes in establishing itself in Brazil mostly because of their marketing strategies. First, in
order to attract people, McDonald’s in Brazil has to adapt to the lifestyle of Brazilians. In Brazil, McDonald's is more
seen as a “treat” you do once in a while, and not a place where you can go eating regularly. Because of this,
McDonald's had to face many challenges, especially concerning the image of their products.
In fact, Brazilians tend to eat healthier products than in the US (more vegetables and fruits) and pay more
attention to what they eat. In this situation, McDonald's has to rethink their strategy and in 2011, it has been decided to
drastically cut sugar and salt from their products but also the quality of the products used has increased.
In addition, menus in Brazil are slightly different from ones that you can find in the US, for example. Instead of
a rich breakfast with basics from bread, meat to eggs, in Brazil breakfasts are simply made of coffee and rolls, juices or
fruits, which are healthier. Also juices are not only served in the morning but also throughout the day as a main healthy
beverage made with various fruits and even locals ones such as açai berry.

Moreover, in Brazil, the promotion has a great part in the
success of the company. The most recent one is the partnership
made for the last World Cup as McDonald's have been choose as
the main restaurant for the event and even launched its « Brazil
Burger » in that period not only in Brazil but also overseas. Special
TV commercials, « innovative » prints and attractive slogans have
also been used to promote the firm in the whole country.
Moreover, McDonald's Brazil is using social networks such as
Twitter or Facebook which are popular among youngest to
promote the firm generation through daily posts, contests and
answers to their customers.
To attract people, Arcos Dorados (McDonald's franchise in
Brazil that manage most of restaurants in the country since 2007)
has created offers to attract people such as games, promotions and
cheap limited menus that will make customers to come again and
create an instant need.
Finally, McDonald's chose to focus on create first
franchises on the largest cities, where people are more opened to
the American culture, and then spread to smaller cities to target
more people at first and ensure a growing success
FI G U R E 7: AD FOR THE BRAZIL BURGER DURING THE
BRAZIL’S SOCCER WORLD CUP 2014
FI G U R E 6: ENDIVES, ESCAROLE AND CHICORY AT BRAZILIAN MCDONALD'S SALADS


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M c D o n a l d ’ s C o m p e t i t i v e S t r a t e g y i n B r a z i l
Porter’s Five Forces Analysis is a framework to analyse the nature and the level of competitiveness of the
specific market within an industry. This industry analysis and business strategy gives a complementary perspective how
organizations achieve competitive advantage.
When using Porter’s framework companies can determines the relative power of each Porter’s five forces and
identifies how to position itself to take advantage of opportunities and anticipate threats. The five forces are:

FI G U R E 8: PORTER'S FIVE FORCES
Using Porter’s Five Forces Framework is also possible to analyse the competitiveness of the McDonald’s in
Brazil.
- Force I: The threat of new entrants to industry
The threat of new entrants is considered as a major force concerning competition because this analyse provide
information concerning barriers and the reaction of existing competitors. There are several forms of entry barriers like:
capital requirements, regulatory and legal constraints, switching costs and product differentiation,
economies of scale, access to distribution channels and the resistance offered by existing businesses:
A company like McDonalds has to develop competitive strategies that differentiate it from its rivals in Brazil
need to invest strongly to remain competitive due the size of the population and the country. Brazil has around 20 cities
with more than 1 million people and several numbers of shopping malls and represents a large market. These malls are
located in strategic areas and are very expensive to rent a place with a surface as McDonalds restaurants. Also, it is
considerably expensive to register a company in Brazil in comparison to other countries because regulatory and legal
permission takes long time and are costs are exorbitant.


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Brazil is known for its bureaucracy and a long list of requirements are needed to open a company or franchise.
These processes involve several steps and represent more costs for the company. The two most important
requirements are the Business Licence and the Sanitary Permit that guarantees the operation of the business activity. In
addition, McDonalds faces a strong competition in Brazil due the expansion of others national and international fast
food chains.
In Brazil, the fast food sector is very competitive and the mainly McDonalds competitors are:

National (Brazilian local chains) International (Foreign chains)
Bob's Burger King
Habib's KFC
Giraffa's Subway
Brazilian Snack bars Starbuck's
FI G U R E 9: MCDONALD'S COMPETITORS IN BRAZIL

McDonalds advantages in comparison with other chains in Brazil are the low price and brand loyalty. But,
concerning product differentiation McDonalds and its international competitors offer classic products with few
adaptations for the Brazilian market. Comparing McDonalds with other international chains in Brazil, McDonalds is very
competitive because remain the most powerful brand of the sector in the world. But its strongest competitor, Burger
King, is becoming very popular in Brazil due the extra quality of their products and also because Burger King offers for
their customers free refills in all restaurants.
Arcos Dorados, the biggest franchise of McDonalds in the world, operates more than 800 McDonald’s
restaurants in Brazil, employs over than 50 thousand employees and serves 1,7 million customers daily. Brazil represents
the 8th seller for the operator that has an annual receipt of around U$1,5 billion2
and growth of almost 5%3
. Despite all
the competitiveness in the country these figures shows that Arcos Dorados - McDonalds obtains substantial economies
of scale remains very strong. This will give them an advantage for McDonalds over new competitors who will not be
able to match their lower unit costs of production.
McDonald's entered Brazil in 1979 in a joint venture with a Brazilian entrepreneur. Today McDonalds has
already established its solid distribution channels in the country for some products because McDonalds doesn’t buy
beef directly from local ranchers. It buys the product finished from food processing companies around the world.
Concerning local distribution channels, McDonalds the biggest Fast-Food company in Brazil, provide difficult for new
competitors to gain access to channels distribution and provide their products to customers.
Another aspect that makes McDonalds very competitive in Brazil is the price of products offered for local
customers. The company offers a strong resistance as existing businesses because obtain economies of scales and low
prices if compared with its competitors. If existing competitors choose to resist strongly, it will make it difficult for new
organizations to enter the industry. McDonalds also can increase marketing expenditure to discourage new entrants
and be competitive in the country with others existing businesses. The last FIFA World Cup realized in Brazil in 2014,
McDonalds was one of partners of the event taking good advantage of this association with the most popular event and
sport in the world.
- Force II: The threat of substitutes products
A substitute product is a product from another industry that offers similar benefits to the consumer as the
product produced by the firms within the industry. But, a substitute can be also something that meets the same needs
as the product of the industry. The extent of the threat from a particular substitute will depend upon the following two
factors: the extent to which the price and performance of the substitute can match the industry’s
product and the willingness of buyers to switch to the substitute.
In the fast-food industry, including McDonald’s, the threat of substitutes is greater now more than ever with the
convenience food industry growing in Brazil. More convenience food stores are offering similar products as the fast-

2
2009 Annual receipt in Brazil
3
Annual growth in 2009 compared with 2008.


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food restaurants. The convenience store located in gas station and the lanchonetes - Brazilian’s traditional snack bars -
sells many food items such as hot dogs, hamburgers, pizzas, Brazilian tapas, etc. These snack bars offer also a bigger
option of beverage choices than in a traditional fast-food restaurant. Brazilians prefers juices than sodas and in these
“Brazilian Fast-food restaurants” juices are freshly squeezed, healthy and cheap.
The Lanchonetes can be found in every street corner in Brazil, are usually open on the street and can be
considered very competitive concerning the threat of substitutes products for McDonalds and all traditional fast-food
restaurants. But, concerning quality and hygiene McDonalds can be considered more competitive than the lanchonetes.
- Force III: The power of buyers or customers
The power of buyers refers to the pressure that these consumers can exert on businesses to get them to
provide higher quality products, better customer service, and lower prices. The ability of customers of the industry to
influence the price and terms of purchase depends of a number of factors.
In Brazil consumers have more power over buying McDonald’s products because they can demand what type
of products they want to see from them. Today, consumers are demanding healthier food and beverage choices from
fast-food restaurants such as McDonald’s. After the documentary film “Supersize Me” by Morgan Spurlock came out in
2004, McDonald’s had to reclaim its name by showing America that their company cares about the health of their
customers and cut out their “supersize” program.
Today, with the expansion of the middle class in Brazil - about 100 million people - McDonalds can offers their
products for a large number of customers. These customers tend to buy only a classic menu that means buyers have
comparatively weak power. But, buyers have a set of options because the fast food industry in Brazil is composed by a
large number of members and substitutes reducing the power of McDonalds and increasing the power of customers.
Despite the power of buyers in Brazil, they haven’t a strong influence upon the prices. Brazil is one of the top five most
expensive countries on the Big Mac and considered a middle class fast food restaurant.
- Force IV: The power of suppliers
The presence of powerful suppliers reduces the profit and can increase competition within the industry by
threatening to raise prices or reducing the quality of products and services. As a result, they reduce profitability in an
industry where companies cannot recover cost increases in their own prices. The major factors determining the power
of suppliers are: the uniqueness and scarcity of the resource that suppliers provide, the cost of switching to another
resource, how many other industries have a requirement for the resource and the number and size of the resource
suppliers.
McDonalds suppliers in Brazil are less powerful because the resource that they supply is not scarce, there are a
large number of substitutes to supply the resources that McDonald’s needs, switching costs are low and also because
the companies in the industry buying the same resource are large.
- Force V: Rivalry among businesses in the industry
Industry rivalry usually takes the form of jockeying for position using various tactics (for example, price
competition, advertising battles, product introductions). This rivalry tends to increase in intensity when companies either
feel competitive pressure or see an opportunity to improve their position.
When Brazilian consumers think of fast food, they think of McDonald's. History and prestige gives to
McDonalds an advantage against other international and/or local chains. Prices have remained low due to the
enormous wealth's ability to take a hit on price margins and the national expansion making up for the declining in other
big cities. The numerous stores also satisfy consumers on convenience. Being in the industry for so long has allowed to
McDonald’s to lock in certain Brazilian suppliers at beneficial prices.

Rivalry competition is high when there are just a few businesses equally selling a product or service, when the
industry is growing and when consumers can easily switch to a competitors offering for little cost. In this case, we can
consider that McDonald’s have some advantages because in Brazil exists a several numbers of competitors and because
McDonald’s offers products with low price. But, in Brazil, the fast food industry is growing and lanchonetes (Brazilian
snack bars) can offers products less expansive.


17

A m e r i c a n M a n a g e m e n t S t y l e i n B r a z i l

In order to manage a Brazilian team in a American style inspired company, some adaptations needs to be
done as Brazilian and American management style are opposed.
While the US culture is based on individualism, Brazil tends more to collectivism. Some others differences can
be seen with the perception of performances, time or trust. For example, an American manager would be surprised to
see that Brazilians only work with people they feel close to and are not afraid to take their time to make a decision. It
would be better to establish a “family climate” between all the workers and managers to create well working
conditions.
Managers should take in consideration the importance of the private life in Brazil, instead of blaming them if
something happens concerning their family for example, the manager should be comprehensible to not destabilize the
employee, and maybe find a solution. Managers can also use the fact that if their employees work better, it would be a
good thing for their families, this creating a new motivation factor.
In the Brazilian culture, it is not uncommon to be more than 15 minutes late, but for Americans it can affect the
perception of seriousness from the employee. The best thing to do in that case is to impose common rules to everyone.
Finally, to motivate employees, we would use the American system that encourages workers with its
“Employee of the month“. Widely spread in the US and popular in Latin America, this method boosts employees'
confidence and encourages them to work harder each month to have their picture shown on the wall and a pin’s in the
t-shirt to customers identify the better employee of the month.

Figure 10: MCDONALD’S EMPLOYEE OF THE MONTH PIN'S


18

C o n c l u s i o n
This case study shows us that McDonald’s success in Brazil in not mere coincidence, but the result of a well-
designed and elaborate strategy, that made McDonald’s the biggest fast food chain in the world. Its organization,
based on a very hierarchical system, makes the communication between workers and their superiors easier, and enables
each and every employee to understand clearly its role in the restaurant. In a fast-food restaurant, efficiency and rapidity
are essential to serve customers quickly, and McDonald’s, thanks to its organization, and gathers these two qualities.
What’s more, by choosing the franchise system, McDonald’s could settle in most continents, and could adapt
to the local market. In order to break into the Brazilian market, McDonald’s took account of its cultural specificities,
which are different from other Latin-American countries. They also adapted their product to the Brazilian market, and
created new specialties, such as the Cheese Quiche (Pão de Queijo). In Brazil, they took advantage of an increase
middle-class population to target this group, which are a great opportunity to expand their market all over Brazil. They
also had to adapt to Brazilians’ lifestyle, which pay a lot of attention about what they eat, and decided to produce more
“healthy” food. Thus, they offer fresh fruit juice, some with Brazilian fruits, for all day long, which do not exist in the
U.S.. They also made the most of the Brazilian World Cup to create new menus (and new needs), and launch a
promotion campaign. McDonald’s is not the only fast-food chain in Brazil, and have to fight a fierce competition with its
rivals. But McDonald’s leader position in the market is now established.
Among others values, they aimed at providing customers with high quality food in an irreproachable cleanness
and hygiene. They claim that they respect and encourage their employees for their career at McDonald’s, that they
work ethically and that they built charity associations. They promote their three-legged stool system (owners,
employees, suppliers) and try to find a compromise between the three parts. But the two examples show us that
McDonald’s do not always respect their principles. They are accused of discrimination and of serving expiring food to
customers. But these cases are very occasional, so globally we can say that McDonald’s follow (or at least try to) their
values.
As in many countries all over the world, McDonald’s main target group is the youth, because they are open-
minded and toward “foreign” food. But in Brazil, McDonald’s try to conquer new markets, such as the middle-class,
which is growing and have enough purchasing power to go often to McDonald’s. They also want to expand the brand
all over Brazil and settle in the country’s interior regions, where there are a substantial potential group of consumers.


19

S o u r c e s
1. Webography:

- Brazil GDP. Trading Economics [In Site]. http://www.tradingeconomics.com/brazil/gdp
- Redefining Brazil’s Emerging Middle Class. BCG Perspectives by The Boston Consulting Group [In Site].
https://www.bcgperspectives.com/content/articles/center_consumer_customer_insight_globalization_redefining_brazils_emerging_mi
ddle_class/?chapter=2
- Social policy, economic changes transformed Brazil. Progreso Weekly by Francisco Aruca [In Site]. http://progresoweekly.us/social-
policy-economic-changes-transformed-brazil/
- Standards of Business Conduct - The Promise of the Golden Arches. McDonalds [In Site].
http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Standards_of_conduct/14356_Standards_of_Business_Con
duct_2013_2.pdf
- McDonald’s business ethics. UK Essays [In Site]. http://www.ukessays.com/essays/business/mcdonalds-business-ethics.php
- 7 ways Brazilians work differently than Americans. Brazil - Compass.com Blog [In Site]. http://www.brazil-compass.com/2012/03/7-
ways-brazilians-work-differently-than.html
- Release. McDonald’s Brazil [In Site] - [In Portuguese]. http://www.mcdonalds.com.br/imprensa/category/press-kit/
- Mission & Values. McDonald’s [In Site]. http://www.aboutmcdonalds.com/mcd/our_company/mission_and_values.html
- Values in action. McDonald’s [In Site]. http://www.mcdonalds.com/us/en/our_story/values_in_action.html#
- Starting a small business. Community Organisers Toolbox [In Site].
http://www.mcdonalds.com/us/en/our_story/values_in_action.html#
- BRIC Countries – Background, Latest News, Statistics and Original Articles. Globalization, Sustainable Development and Social
Impact in World Rankings, Countries and Cities [In Site]. http://www.globalsherpa.org/bric-countries-brics
- Permits and Licenses to Operate your Business in Brazil. The Brazil Business [In Site]. http://thebrazilbusiness.com/article/permits-and-
licenses-to-operate-your-business-in-brazil
- KHARPAL, Arjun, November 8, 2013. Fast food giants locked in battle for Brazilian market. CNBC [In Site].
http://www.cnbc.com/id/101182151#.
- Arcos Dorados. McDonald’s [In Site] - [In Spanish]. http://www.arcosdorados.com
- KOTTAK, Conrad. McDonalds in Brazil: culturally appropriate marketing. Ethnographic Solutions [In Site]. http://www.ethnographic-
solutions.com/white-paper/food-and-retail/mcdonalds-in-brazil-culturally-appropriate-marketing.html
- McDonald's Success Story in Brazil. ICMR - IBS Center for Management Research [In Site].
http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR408.htm
- RIVERA, Jason, December 26, 2012. Brazil Fast Food Is Substantially Undervalued And Has A Moat [In Site].
http://seekingalpha.com/article/1082541-brazil-fast-food-is-substantially-undervalued-and-has-a-moat
- CHELSEA & KINSEY, September 29, 2013. Brazil's lanchonete survival guide. The Travelin’ Clicks [In Site].
http://www.thetravelinchicks.com/finger-lickin-food/brazils-lanchonete-survival-guide
- SENOSIAIN, Melanie, 2012. Managing in Brazil: a guide for American managers. University of Central Florida [In Site].
http://etd.fcla.edu/CF/CFH0004178/Senosiain_Melanie_B_2012May_BSBA.pdf
- VICTOR, David A. Brazil, doing Business in. Reference for Business. [In Site].
http://www.referenceforbusiness.com/encyclopedia/Assem-Braz/Brazil-Doing-Business-in.html
- POIRIER, Ségolène, April 8, 2012. McDonald’s Brazil has Big Plans: Daily. The Rio Times [In Site]. http://riotimesonline.com/brazil-
news/rio-daily/mcdonalds-brazil-has-big-growth-plans/#
- GUIMARÃES, Saulo P., Sept 5, 2013. Why McDonald`s has gone to the countryside. Exame.com in English [In Site].
http://exame.abril.com.br/english/brazil-now/why-mcdonald%60s-has-gone-to-the-countryside.shtml


20

- Catering to Local Tastes. McDonald’s [In Site].
http://www.aboutmcdonalds.com/mcd/our_company/amazing_stories/food/catering_to_local_tastes.html
- DE SAINTE CROIX, Sarah, March 23, 2012. Middle Class Growth in Brazil: Daily. The Rio Times [In Site].
http://riotimesonline.com/brazil-news/rio-daily/middle-class-growth-in-brazil/
- JAMIESON, Dave, January 22, 2015. Workers Sue McDonald's For Discrimination, Opening New Front In Franchise Fight. Huffing
Post Business [In Site]. http://www.huffingtonpost.com/2015/01/22/mcdonalds-discrimination-lawsuit_n_6523300.html
- LI, Zoe, July 30, 2014. China's tainted meat scandal explained. CNN [In Site].
http://edition.cnn.com/2014/07/29/world/asia/explainer-china-meat-scandal/
- YAN, Sophia, July 30, 2014. Meat scandal takes a bite out of McDonald's sales in Japan. CNN Money [In Site].
http://money.cnn.com/2014/07/30/news/mcdonalds-japan-meat-scandal/index.html?hpt=hp_t3
- DAVIS, Elouise, July 5, 2014. McDonald’s Brazil in a (Mc)Flurry. In Competition [In Site].
http://www.incompetition.com.au/2014/07/mcdonalds-brazil-mcflurry-abuse-dominance-allegations/
- MUNARRIZ, Rick A., March 13, 2014. Why Is Latin America Lovin' McDonald's More Than the USA?. Daily Finance [In Site].
http://www.dailyfinance.com/2014/03/13/why-latin-america-lovin-mcdonalds-more-america/
- RAY. September 26, 2011. McDonald's in Brazil VERY different than McDonald's in the US!. American Heart, Brazilian Soul Blog. [In
Site].
http://sbcspbr.blogspot.fr/2011/09/mcdonalds-in-brazil-very-different-than.html?m=1
- McDonalds Brazil [In Site]. http://www.mcdonalds.com.br
- McDonalds Case Analysis. 1,2,3 helpme!.com [In Site]. http://www.123helpme.com/mcdonalds-case-analysis-view.asp?id=166350
- BARNAT Ryszard, Business and Its Environment. Strategic Management: formulation and implementation [In Site].
http://www.strategy-formulation.24xls.com/en101
- WILKINSON, Jim, July 24, 2013. Porter’s Five Forces of Competition. The Strategic CFO [In Site].
http://strategiccfo.com/wikicfo/porters-five-forces-of-competition/
2. Books:

- HERRINGTON, Elizabeth, 2009. Passport Brazil. World Trade Press. ISBN: 978-1-60780-013-2.
- STRINGER, Donna M., CASSIDAY, Patricia A, 2005. 52 Activities for exploring values differences. Intercultural Press. ISBN:
978-1-
877864-96-4.
- CAMPBELL, David, STONEHOUSE, George, 2002. Business Strategy - An Introduction. Taylor & Francis. ISBN:
978-0-7506-5569-9
3. Videos:

- SPURLOCK, Morgan. Supersize me in 7 mins: How too much of McDonald's will make you feel!. Youtube by HIBZTA. (In Site] -
[Uploaded on Oct 6, 2009]. https://www.youtube.com/watch?v=N2diPZOtty0


21

T a b l e o f F i g u r e s
Figure 1: Brazilian Flag_____________________________________________________________________________________ 4
Figure 2: McDonald's Corporate Organizational Structure Diagram______________________________________________ 5
Figure 3: McDonald's Representatives Structure Diagram ______________________________________________________ 6
Figure 4: McDonald's Value-driven Strategy __________________________________________________________________ 7
Figure 5: McDonald's Adapted Products in Brazil_____________________________________________________________12
Figure 6: Endives, Escarole and Chicory at Brazilian McDonald's Salads _________________________________________13
Figure 7: Ad for the Brazil Burger during the Brazil’s Soccer World Cup 2014____________________________________13
Figure 8: Porter's Five Forces ______________________________________________________________________________14
Figure 9: McDonald's Competitors in Brazil__________________________________________________________________15
Figure 10: McDonald’s Employee of the Month Pin's _________________________________________________________17

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