International convergence of Tastes

A rapid convergence of tastes is taken place in the world today. Tastes in the United States affect tastes
around the world, and tastes abroad strongly influence tastes in the United States. Coca cola and jeans
are two of the most obvious U.S product’s that has become household items around the world. One can
see Adidas sneakers and Walkman personal stereos on joggers from central park in New York to Tivoli
gardens in Copenhagen. You can eat a big mac in piazza di signal in Rome or gorkey's Square in Moscow.
We find Japanese cars and VCRs in new York and in New Delhi, French perfumes in Paris and in cairo and
Perrier in practically every major(and not so major) cities around the world. Texas instruments and
canon calculators, Zenith and Hitachi portable PC's, and Xerox and Minolta copiers are found in offices
and homes more or less everywhere. With more rapid communications and more frequent travels, the
worldwide convergence of tastes has even accelerated. As a result, firms must increasingly think in
terms of global production and marketing to remain competitive in today’s rapidly shrinking worked.
Even small firms must constantly worry that new global products do not wipe out their entire product
line overnight.

In his 1083 article "The Globalization of markets" in the Harvard Business Review, Theodore Levitt
asserted that consumers from New York to Frankfurt to Tokyo want similar product and that success on
the future would require more and more standardized products and pricing around the world. In fact, in
country after country, we are seeing the emergence of a middle class consumer lifestyle base on a taste
for comfort, convenience, and speed. In the food business, this means packaged, fast to prepare, and
ready to eat products. This is the inevitable result of the information revolution from people traveling
more and more, and seeing the same movies and TV shows. Market researchers have discovered that
similarities in living styles among middle-class people all over the world are much greater than once
thought to be and are growing with rising incomes and education levels. With the tremendous
improvement in telecommunications, transportation, and travel, the cross-fertilization of cultures and
convergence of tastes can be expected only to accelerate in the future-with all its important implications
for consumers, producers, and sellers of an increasing number and variety of products and services.
Substitutions between Domestic and Foreign Goods

Substitutions between domestic and foreign goods and services have reached an all-time high in the world
today and are expected to continue to increase sharply in the future. For homogeneous products such as a
particular grade of wheat and steel, and for many industrial products with precise specifications such as
computer chips, fiber optics, and specializes machinery, substitutability between domestic and foreign
products of almost perfect. Here, is small price difference can lead quickly to large shifts in sales from
domestic to foreign sources and vice versa. Even for differentiated products, such as automobiles and
motorcycles, computers and copiers, watches and cameras, films and TV programs, soft drinks and
cigarettes, soaps and detergents, commercial and military aircrafts, and most other products that are
similar but identic, substitutability between domestic and foreign products to every high and rising. Despite
the quality problems of the past, U.S-made automobiles today are highly substitutable for Japanese and
European automobiles, and so are most other products. Furthermore, with many parts and components
imported from many nations and with production facilities and sales around the world often exceeding sales
at home, even the distinction between domestic and foreign products is fast becoming obsolete. Should a
Honda Accord produced in Ohio or considered American? What about a Chrysler minican produced in
Canada? Is an Kentucky Toyota or Mazada rich uses nearly 50 percent of imported Japanese parts
American? It is clearly becoming more and more difficult to define what an American automobile is even
after the American Automobile Labeling Act of 1992, which requires all automobiles sold in the United
States to indicate what percentage of the cars parts are domestic or foreign. Indeed, one could even ask if
the question is relevant in a world growing more and more interdependent and globalized.
The Demand for Big Macs

McDonalds holds nearly 30 percent shares of the $65 billion U.S, restaurant business and 46 percent of its
$2.6 billion burger business. It serves more than 22 million customers per day and with sales of nearly &15
billion in 1993 l dwarfs its competitors. After nearly three decades of double-digit gains, however, domestic
sales at McDonalds have been growing slowly since t1986 as a result of higher prices, changing tastes,
slow growth of the domestic economy, demographic changes, and increased competition from other fast-
food chains and other forms of delivering fast-foods.

Price increases at McDonalds exceeded inflation in each year since 1986 and in 9 of the last 17 years. The
average check at McDonalds is now $4- a far cry from the 15% hamburger on which McDonalds got rich
and customers streaming to lower pricing competitors. Concern over cholesterol and calories, as well as a
slowing down of growth of the economy and in personal incomes, have also reduced growth. In Addition,
the proportion of the 15-29- years old (primary fast-food customers) in the total population has shrunk from
27.5 to 22.5 percent during the past decode. Increased competition from other fast-food chains, other fast-
food options (pizza, chicken, tacos and so on), frozen fast foods, mobile units, and the vending machines
has also slowed down the growth of demand for Big Macs.

McDonalds did not sit idle and tried to meet its challenges head on by introducing a "value menu" in 1990
with small hamburger selling for as 59 cents(down from 89 cents) and a combination of burger, French fries
and soft drink for as much as half off. In response to increased public concern about cholesterol and
calories, McDonalds began a publicizing the nutritional content of its menu offerings, substituted vegetables
oils for beef tallow in frying its French fries, replaces ice cream with low fat yogurt, introduced bran muffins
and cereals to its breakfast menu, and even (unsuccessfully) introduced the MacLean Deluxe-a new
reduced fat, quarter pound hamburger of which McDonalds spent from $70 million to develop and provide.
Furthermore, in response to increased competition from frozen fast foods, mobile units and vending
machines an increasing number of McDonalds franchises have drive-through, from which they now
generate almost half their business. McDonalds is also expanding very rapidly abroad, where it faces much
more room for growth.