Yoshie Furuhashi wrote:
>On one hand, it's a funny anecdote; on the other hand, the
>popularity of Coke, Pepsi, etc. in poor nations is often a sad index
>of the absence of potable tap water.
-Yes it is. But people also like the stuff, something which causes -anguish among high-toned Europeans and American leftists. Interesting -he served Pepsi, the Republican cola, rather than Coke.
One thing that struck me when I first visited Eastern Europe in 1990, soon after the Wall fell, was the incredible status of Coke in stores - an obvious prestige item. While my first reaction was the "culteral imperialist" reaction, I then tasted the drinks that the Communists had created as cola equivalents. My god, what rotgut!
There is a point that a socialism that cannot deliver sugar water that tastes better than piss cannot expect to survive.
There is sometimes a fetish to discount the quality and substance that makes major brands successful - the scope of books in Barnes & Noble, the low-price and consistency of McDonalds, the taste of Coke - to imagine that people consume them just because of mindless herd consumerism. There may be hidden personal and social costs to those advantages, but to the extent that leftists ignore the upfront reasons why people enjoy them, they just end up sounding like hair-shirt weirdos to the general population.
THE ECONOMIST noted in an article this week that McDonalds has come under criticism for allowing its franchises to be "too local" without enough centralized uniformity to maintain the consistency that is its prime advantage.
See below
------- Where's the beef?
Nov 1st 2001
>From The Economist print edition
The boss of McDonald's is accused of running a heartless, global corporation. If only he was
JACK GREENBERG'S favourite video clip in the wake of September 11th shows a crowd of irate Muslims shaking their fists and roaring anti-American slogans outside a McDonald's restaurant in Jakarta, the Indonesian capital. Until, that is, the aghast owner runs outside, shouting that he is a Muslim who shuts up shop each Friday so that his employees can go to the mosque. Abashed, the protesters slink away.
While the McDonald's chief executive is delighted at their response, the episode encapsulates an irony at the heart of the world's largest fast-food empire. The group is often derided as a symbol of all that is wrong with globalisation: the imposition of red-toothed capitalism and shallow American values on an unwilling world. But in fact, the firm's problem is often not that it is too global-but that it is not global enough.
Of course, with more than 29,000 restaurants in 121 countries, few companies are more international. But when it comes to management, Mr Greenberg runs McDonald's less as one worldwide company than as "an amalgamation of local businesses run by local entrepreneurs from Indonesia to France". Since taking over as chief executive in 1998, he has deliberately devolved power from the centre. By loosening the grip of his predecessor, Michael Quinlan, Mr Greenberg has rebuilt tattered relationships with franchisees, who run four-fifths of the restaurants, and has given them more freedom to decide everything from marketing to new additions to the menu.
Fine, except that this decentralisation has taken its toll on the main pillars of the McDonald's brand: service, quality and cleanliness. Founded by Ray Kroc in 1955, the chain built its success less on the taste of its food than on rock-solid standards and unfailingly good service. Famously obsessive (as a retiree he would spy on his local McDonald's with a telephoto lens), Mr Kroc's saying that "if you've time to lean, you've time to clean" passed into company folklore.
Things are different under Mr Greenberg. In the United States, which still accounts for half the business, surveys show customer satisfaction falling below levels at rivals such as Wendy's and Burger King. McDonald's market share is flat, with customers defecting not only to obvious rivals, but to coffee shops and delicatessens. Add in nasty distractions such as mad-cow food scares in Europe, and the company's performance is now as soggy as some of its burgers.
On October 29th the company gave warning that profits in 2002 would miss expectations. Real sales growth has fallen (see chart), margins are shrinking and returns on investment are declining as the group pours capital into new stores. The "Mcbrand" even lost value last year, according to Interbrand, a consultancy.
Mr Greenberg is trying to stem the decline. On October 17th, on the heels of a management shake-up in May, he announced a restructuring that cuts the number of regional divisions in America from 37 to 21, and adds a new layer of management to monitor quality and impose tougher standards on franchisees. But cynics point out that the part of the business now most in trouble-the home market-is the one Mr Greenberg tried to restructure before becoming chief executive. He also bears some of the blame for slipping standards. His introduction of the "Made-For-You" food-assembly system failed to boost sales, and took staff away from serving customers. Michael Roberts, the head of McDonald's US, says that the latest restructuring will involve, among other things, simplifying a menu that started out with three items but now offers 75.
McNice Guy One of Mr Greenberg's problems is that he is nice. For a former accountant, he is decidedly human. He likes a joke, has created a warm culture at head office in Oakbrook, Illinois, and is humble about past mistakes, admitting that "we've been distracted from running great restaurants by our growing complexity." His open manner contrasts with the single-minded arrogance that cost a former Coca-Cola boss, Doug Ivester, his job in 1999. But this amiability may make it difficult for him to face up to the tough choice now facing McDonald's: should it continue to be run as a loose federation of local franchises that can be expanded rapidly, albeit at the risk of falling standards? Or should it become a more tightly controlled global group that sacrifices some growth to maintain quality?
Although Mr Greenberg's latest move appears to inch the company down the second path, he remains gung-ho at heart, promising to open some 1,400 stores next year, the same number as this year. "We are not mature in any markets even after 46 years," he says. "New store openings will always be important and in time will accelerate."
As the network of franchisees grows, Mr Greenberg seems afraid to tinker with it. While Mr Roberts is keen on fewer, stronger franchisees with bigger territories, his chief executive has reservations about any such overhaul. "The relationship with franchisees is so important to us, it may get in the way of us being honest," he admits.
Yet the stockmarket would like to see a tighter, more centralised McDonald's. Instead of aggressive expansion, investors want McDonald's to concentrate on the profitability of existing stores. Excess cash might be better used repaying debt or buying back shares-this week, after its profit warning, McDonald's announced a second buy-back programme, this time worth $5 billion, roughly 15% of its outstanding shares. Or it might develop the group's newer pizza, sandwich and Mexican-food chains, rather than raising yet more golden arches. Yet, as Coca-Cola and others have already found, and Mr Greenberg is only now discovering, managers who excel at driving forward a fast-growing business are often unsuited to running one that is slowing down.