IT’S A FIRST GENERATION CORPORATE SOCIETY
In this context, both first generation and advanced market
corporations should beware of the seduction of what popular
brand names such as GE, Coca-Cola and P&G are doing,
and instead develop practices that will put them on the
productivity growth path. Given that most emerging markets
are in the first corporate generation, this requires first moving
to the standardization era and creating plans which reflect the
realities of the phase that their corporate societies are currently
experiencing, and are growing into.
While the temptation exists to rapidly jump to the
professionalization era, transitions should be allowed to occur
naturally. These processes tak e time, but with the benefit of
hindsight provided by existing corporate societies such as the
US, today’s business leaders can help markets move through
the generational change more smoothly. For emerging market
success, there may be little benefit in looking to the Western
business practices of today, but there is much to be learned
from their past.
Tommy Weir. In addition to his role as Editor-in-Chief at EMB, Tommy is an author, speaker and CEO
coach to emerging market business leaders as well as founder of The Emerging Market Leadership
Center.
TO MAKE SENSE OF A FIRST
GENERATION CORPORATE
SOCIETY, ASK YOURSELF:
• Which corporate generation are your target or existing
markets currently in?
• Does your business model match the corporate era you
are in? And if you are present in multiple markets, does the
model adequately fit each of them?
• If the answer to the latter is no, what business model
should you employ to ensure that you (a) align with the
given corporate era, and (b) encourage growth through
productivity gains, without maturing the market too soon
and stripping it of growth potential?
• Are you looking to first generation or fully corporatized
companies for guidance in developing your business model?
• If you are working in multiple countries, how can you
cluster like-for-like in order to maximize the opportunities
rather than rely on a one-size-fits-all model?
THE McDONALD’S
EFFECT
In 1955, one year after joining McDonald’s, American
businessman Ray Kroc began applying the thinking behind The
Industrial Revolution to the process of business development.
In doing so, he perfected the franchise engine, thus bringing the
McDonald’s fast-food chain to the world and paving the way for
the many more franchises that have followed since.
Today, McDonald's is the world's largest chain of hamburger
fast food restaurants, but the American multinational, now
in its 76th year, has journeyed through multiple corporate
generations to get there.
Not long after the company’s establishment in 1940, the
McDonald brothers, Dick and Mac McDonald, shifted the fast
food industry to the second corporate era: standardization.
This occurred at a time when operations were dependent on
the low-cost labor of teenagers. The brothers reorganized their
hamburger stand using production line principles in the form
of the "Speedee Service System" creating a level of productivity
that restaurants had never dreamed of before.
The productivity gains achieved through standardizing restaurant
operations and the development of the franchise model then
catapulted McDonald’s rapidly into the specialization phase.
Noting the need to develop specialized skills for the running
of McDonald’s standardized operations, the company created
Hamburger University in 1961.
It was then in 1967 that McDonald’s first expanded overseas
a progression that highlighted the contrast between
emerging and developed regions. McDonald’s had entered
the professionalization era, while many of the countries it
was expanding into were just setting out on their journeys to
corporatization.
McDonald’s is now present in 119 countries and in executing
its international expansion strategy, the company has behaved
as a typical multinational, developing one operating model and
exporting it to the world.
For this fastfood giant, the one-size-fits-all approach that global
multinationals are now warned against, appeared to work for
several decades. In recent years, however, it has changed its
strategy. In 2015 the company’s geographic structure was
replaced by one that organizes markets by their maturity within
the McDonald’s system, making it one of the first companies to
acknowledge the importance of corporate eras.
This new structure consists of four groups: (1) the USA: its largest
market representing 40% of sales; (2) international lead markets
including Australia, Britain, Canada, France and Germany; (3)
high-growth markets such as China, Russia and South Korea;
and (4) foundation markets in other parts of the world that the
company seeks to step back from in favor of franchising.
The McDonald’s experience may fail to resonate with emerging
market companies at first glance. What is the developing world
equivalent? one might ask—and justifiably so. The current
reality is, there simply isn’t an emerging market equivalent,
but McDonald’s provides an opportunity for companies to learn
from its experiences to ensure that in the not too distant future,
there will be.
36 Emerging Markets Business Summer 2016 • Issue No. 1