Marketing failure of McDonalds in Bolivia

McDonalds failure in Bolivia as believed by marketing analysts across the world, was natural. Though it sounds unbelievable and surprising for many across the globe. McDonalds management was almost certain about the failure as their finest promotional campaign, both in electronic and print media failed to yield any result. McDonalds failed miserably to position their product in the minds of Bolivians. A multinational giant with great resources couldn’t understand the requirement of a new market. The very idea of fast food burgers was not acceptable to the common people. However, observers were not at all surprised as the concept of ‘fast-food’ was diametrically opposite to the concept of ‘meal’ to traditional Bolivian society. Bolivians were not at all accustomed to fast-food as part of their daily life. Food to a Bolivian is something that has been cooked with care and love, whereas fast-food is cheap, can be cooked easily and something that just fills the stomach when someone is in hurry. Thus, the common Bolivian never accepted this concept. In a nutshell, it was a deep cultural rejection as expressed in the documentary on this subject, just after McDonald’s left Bolivia.

How McDonalds made such a terrible mistake?

Subsequent publications clearly identified the research gaps before McDonalds took investment decision in Bolivia. Katsioloudes & Hadjidakis (2007) argued that due to lack of understanding of the socio-cultural aspect of their target market, McDonalds failed to generate their expected sales. It is rather surprising how the research team of McDonalds overlooked the potential challenges before entering into Bolivia. Marketing analysts are clearly divided in their opinion. According to one group, success of McDonalds in other countries was primarily responsible for lackadaisical attitude towards cultural sensitivity of Bolivia, whereas opponents termed it as ‘misinterpretation of research outcome’ (Natural News, 2013). Whatever be the case, after fourteen years of sustained effort, McDonald’s finally decided to leave Bolivia in 2002.

Research gap that led to bankruptcy

Though McDonalds strategy, as evidenced from other countries across the globe was to align with host country’s requirement and thorough customization to suit local palate, failure clearly indicated possibility of research gap. McDonalds in Bolivia was unable to match their offer to suit local needs. Theres a common believe that company executives paid little attention to understand whether a society is ready to accept conceptual changes in relation to their culinary and if their sustained promotional campaign would result in displeasure among target customers. Such a failure of a multination giant with finest managerial capabilities sparked debate throughout the globe and attracted attention of socio-economic researchers.

According to the US media, Bolivians had already started accepting fast-food culture and the decision of withdrawing was actually due to natural restructuring process, as reported by Global Research News (2013). According to them, it wasn’t because of compulsion, as propagated by the international media. Whatever be the claims of US media, even subsequent documentary on McDonalds, titled ‘Why did McDonalds Bolivia go bankrupt’ clearly stated that Bolivian culture didn’t permit McDonalds to permeate in Bolivian society with their offering, (Global Research News, 2013). Common Bolivians always perceived McDonalds food as unhealthy and unfit for their family. Despite finest promotional campaign for a period of fourteen years, McDonalds failed to position themselves favourably, even among young Bolivians – traditionally the age group that is considered as risk takers. McDonalds internal analysis also revealed that rejection wasn’t due to the taste of food McDonalds offered. It was because of the Bolivian belief about ideal food and methodology of preparing the food (Global Research News, 2013). Bolivians believed that there was no reason to accept McDonalds offer at the cost of their own health and family members. ‘Processed restructured meat technology’ of McDonalds was completely rejected by Bolivians (Natural News, 2013). Moreover, a compound, namely azodicarbonamide, a chemical agent used as flour-bleaching component to produce plastic-foam was used by McDonalds (Examiner, 2009), though it was banned both in Europe and Australia as a food-additive for a long time but not in Bolivia.

How economic was the departure?

Singh (2000) and Baldwin(2004) believe that bridging the gap between developed and developing economies could only be possible if free movement and equal opportunity to foreign capital could be ensured through government policies. As it has always helped the developing economies to grow by bringing new management skills and technology. Tschoegl (2007) argued that instead of spreading negative image about McDonalds investment, it would have been a win-win situation if the international media executed their responsibilities of revealing true reason of McDonalds departure, i.e. restructuring their business. However, critics clearly rejected this view stating that there shouldn’t be any trade-off between public health and capital movement in food sector, even if the country had accepted multilateral and pluri-lateral trade agreement. Economists like Baldwin (2004) were apprehensive if foreign investment truly brings long-term growth in case of developing and under-developed economies.

Observations

There is no denying the fact that globalization had its impact on traditional culture. Quechua culture of Bolivia is not an exception. Huge inflow of capital, changing lifestyle, altered perception about product quality, busy life-style and associated adjustment in everyday life are reality in all the countries. Multi-national giants thus were always in favour of developing promotional campaign in such a way which would promote standardization and thus offering them scale advantage. However, in case of fast-food chains like McDonalds, instead of product standardization on the basis of expected product line by a sensitive culture, more emphasis were given on better service encounter (i.e. transactional interactions in which one person provides a service or good to another person) to position themselves.

Hawkes (2007) stated that access to calorie-rich, nutrient-poor fast-food items, especially after globalization, is responsible for diet-related chronic disease (DRCD), while trying to determine ‘social-determinants of health’ as a part of ‘Globalization and Health Knowledge Network’ research activity. Moreover, published report about malnourished children among South-American countries clearly reveals dangerous impact of policy-paralysis at government level. Bolivia is no exception. In case of Bolivia, more than one quarter of children had stunted growth and number of overweight women increased by nine percentage point between 1994 and 1998. On the contrary, US researchers identified Bolivia as nutrient-deficient country whenever it was question of child-nutrition. They always identified high positive correlation between malnutrition and cultural abstinence of accepting nutritious food from other societies, in lieu of their own preparation. However, many researchers criticised the findings as biased and motivated to assist multinationals. Whatever be the scenario, Bolivians didn’t agree to switch-over and continued displaying high faith on their own culinary.

References

  • Baldwin, R.E. (2004) Openness and Growth: What’s the Empirical Relationship? University of Chicago Press [Online]. Available from: http://www.nber.org/chapters/c9548 [Accessed: 11th January 2015]
  • Examiner. (2009) McDonalds fast food: toxic ingredients include putty and cosmetic petrochemicals. [Online] Available from: http://www.examiner.com. [Accessed: 11th January 2015]
  • Global Research News. (2013) No More “Fast Food” in Bolivia: McDonald’s Has Closed Down All Its Restaurants. [Online] Available from: http://www.globalresearch.html [Accessed: 11th January 2015]
  • Hawkes, C. (2007) Globalization, Food and Nutrition Transitions. International Food Policy Research Institute Research Paper
  • Katsioloudes, M.I (2007). International Business – A Global Perspective, Elsevier Inc.
  • Global Research News. (2013) No More “Fast Food” in Bolivia: McDonald’s Has Closed Down All Its Restaurants. [Online] Available from: http://www.globalresearch.html [Accessed: 11th January 2015]
  • Naturalnews. (2012) McDonald’s closing all restaurants in Bolivia as nation rejects fast food.[Online] Available from: http://www.naturalnews.com [Accessed: 11th January 2015]
  • Russia Today – TRANSCEND Media Service. (2012) End of Capitalism: Bolivia to Expel Coca-Cola. [Online] Available from: https://www.transcend.org/tms/?p=20675. [Accessed: 10th January 2015].
  •  Singh, H.S. (2000) Ways and Means of Bridging the Gap Between Developed and Developing Countries. United Nation [Online]. Available from: http://www.mit.gov.in [Accessed: 11th January 2015]
  •  Tschoegl, A. E. (2007) McDonald’s – Much Maligned, But an Engine of Economic Development. Global Economy Journal. 7(4).

Priya Chetty

Partner at Project Guru
Priya is a master in business administration with majors in marketing and finance. She is fluent with data modelling, time series analysis, various regression models, forecasting and interpretation of the data. She has assisted data scientists, corporates, scholars in the field of finance, banking, economics and marketing.

Related articles

  • Social Engagement at Sony Corporation The Sony Group, a leading multinational and a world leader in electronics is one of the most prominent examples of social engagement.
  • Eco friendly marketing in India Green Marketing, a strategic approach to market eco-friendly products, is considered as one of the popular marketing approaches...
  • Has Dunkin Donuts failed in India? Dunkin Donuts brand is owned by Dunkin Brands Group which is a well known pioneering brand of quick service restaurants. It has more than 18000 points of distribution in the world with presence in more than 60 countries (Dunkin Donuts, 2014).
  • The Concept of Social Engagement ‘Social Engagement’ is a new buzz in the field of marketing. Though the concept has existed for a long time, it has gained momentum only recently.
  • Apple v/s Samsung; leader of technology and marketing The battle between technological giants: US Owned Apple and Korean Owned results in more innovative products for mobile phone users around the world. It is affecting everything from the price we pay for our phones, to what they are capable of doing and whether we have freedom to choose […]

Discuss

We are looking for candidates who have completed their master's degree or Ph.D. Click here to know more about our vacancies.