Mcdonalds India Analysis.docx

Mcdonalds India Analysis.docx

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McdonaldsIndiaAnalysis

MGX5171

ManagingtheMultinationalEnterpriseCasesandIssues

IndividualReport

McDonald’sinIndia

TableofContents

ExecutiveSummary………………………………………………………………………………………..2

1Introduction………………………………………………………………………………………………..3

1.1CompanyOverview………………………………………………………………………………….3

2.AttractiveMarketFeaturesinIndia…………………………………………………………………….4

2.1MacroeconomicEnvironment……………………………………………………………………...4

2.1.1The“Ignored”IndianFoodServiceIndustry………………………………………………...4

2.1.2HighGrowingEconomysince1990s…………………………………………………….....5

2.1.3EconomicLiberalizationReforms……………………………………………………………5

2.2SocialEnvironment………………………………………………………………………………….5

2.2.1IndianSocietyOverview………………………………………………………………………6

2.2.2PopulationGrowthandUrbanization………………………………………………………6

2.3IndianPoliticalEnvironment………………………………………………………………………6

2.3.1DecreasedGovernmentControl……………………………………………………………6

2.4NationalCompetitiveAdvantageofIndia………………………………………………………..7

3“Localization”-McDonald’sDiverseMultinationalStrategies…………………………………………9

3.1.“EffectiveLocalization”Strategy…………………………………………………………………..9

3.2“PoliticallyCorrect”Strategy………………………………………………………………………..9

3.3“HighIntegrated”SupplyChainManagement……………………………………………………10

3.3.1LocalSourcingwithLocalSuppliers………………………………………………………...10

3.3.2TheUnique“ColdChain”……………………………………………………………………..10

3.4“CulturalSensitive”Strategy………………………………………………………………………...12

3.4.1“ChangingFaces”-BigMactoMaharajaMac……………………………………………....12

3.5“EffectiveMarketPositioning”Strategies………………………………………………………….12

3.5.1MarketSegmentationandPositioning……………………………………………………….13

3.5.2ProductAdaptation…………………………………………………………………………….13

3.5.3PricingStrategies………………………………………………………………………………14

4.FutureChallengesforMcDonald’sinIndia……………………………………………………………14

4.1WhenConfronttheDisputeVoices………………………………………………………………..15

4.2WhenConfronttheLogisticalBottleneck…………………………………………………………15

4.3WhenPriceStillIncrease…………………………………………………………………………..15

4.4SWOTAnalysisofMcDonald’sIndia……………………………………………………………...16

5.KeyCSRIssuesforMNEinCulturalDiverseCountrylikeIndiaandChina……………………...17

5.1SomeConceptualCRSIssues…………………………………………………………………….17

5.2KeyCSRIssuesforMNEwhenoperateinIndiaandChina……………………………………17

6.Conclusion………………………………………………………………………………………………..18

7.References........................................…………………………………………………………….19

ExecutiveSummary

ThisreportproceedsonacasestudyofMcDonald’sinIndia,andfourresearchquestionsareanalysedwithdetailedtheoreticalframeworksandmodels.ThereportdiscussesthemarketattractivenessforMcDonald’stoenterIndia,relatingtoPortersnationalcompetitiveadvantagemodel,andillustratesreasonswhyMcDonald’schoseandenteredtheIndiamarket.Secondly,thisreportcriticallydiscussesthediversemultinationalstrategiesandpracticesthatMcDonald’sadoptedwhichenabledthemtomakeinroadsintotheIndiamarketandaddvaluetoitsIndianoperation.ThenitfurtherexplainsanddiscussesthechallengesMcDonalds’mayfaceinafastgrowingIndianmarket.Last,thecriticalCSRissuesarestressedforanMNEoperatinginaculturallydiverseAsiancountrylikeIndiaandChina.

1.Introduction

McDonald’sinIndiacaseisaclassicandcaseusedinstrategicmanagement,internationalbusiness,marketingandotherrelevantareaseitheracademicstudyorbusinesspracticaltrainings.Itexplainingtheimportanceofamultinationalenterpriseinunderstandingahostcountry’smarketfeaturesandpreciselyevaluatetheattractivefactorsthatencouragetheMNCstoentryanewmarket,inparticularthecountrywithdistinctiveculturaldiversityasIndia;andaccumulategoodmultinationalstrategiesforMcDonald’stobuildandemphasizeonlocalization,itincluding:

effectivelocalmanagement,“politicallycorrect”,itstrongsupplychainmanagement,“culturesensitive”,and“familyoriented”,andtheeffectivemarketingstrategies;theimportanceoffuturechallengesofMcDonald’sandsignificantCSRissuesinculturaldiverseAsiancountrylikeIndiaandChinaarealsostressedlater.Beforeanalyzethecase,thereportgivesabriefoverviewaboutMcDonald’sbelow:

1.1CompanyOverview

McDonald'sdoingglobalbusinessandtheirrestaurantsaroundtheworld.By2003,thecompanyhad30,000restaurantsin121countries.Inthelate1990s,McDonald'senteredinIndia.AlthoughIndiaispoornation,thereare150to200millionprosperousmiddleclasspopulationwasattractedMcDonald's.However,thereareuniquechallengesforMcDonald's.Forthousandsofyears,India'sHinduculturehasreveredthecowanddonoteatthemeatofthescaredcow,alsotherearesome140millionMuslimsinIndia,whorejecttoeatpork.

Thereportanalysesfourrequiredquestions:

themarketfeaturesthatattractedMcDonald’stoenterIndia,howhasMcDonalds’devisedandimplementeditsmultinationalstrategytoaddvaluetoitsIndianoperation,thechallengesMcDonalds’mayfaceinafastgrowingIndianmarket,theCSRissuesthatyoufindsignificantforanMNEoperatinginaculturallydiverseAsiancountrylikeIndiaandChina,bysomerelevanttheoriesandtheoreticalmodelsinbelow:

2.AttractiveMarketFeaturesinIndia

HengandWen（2005）statesthatwhetheranMNCcansuccessfullyenteranewmarketembodyitsaptitudetounderstandtheexternalmacroeconomic,politicalandsocialenvironmentofthehostcountry.MNCsmustmodifytheircompetitivestance,perceiveadequatemarketpotentialtogainoperationalsuccess.ForMcDonald’stostrategicallyidentifytheattractivemarketfeaturesofIndia,thissectionisdividedintofourmajorcataloguesonevaluatingIndia’smacroeconomic,social,politicalenvironment,andIndia’snationalcompetitiveadvantages（byutilizingPorter’sDiamondModel）inwhichattractMcDonalds’toentermarketthere.

2.1MacroeconomicEnvironment

2.1.1The“Ignored”IndianFoodServiceIndustry

In1990s,owningtoIndianconsumers’distinctdietaryhabitsandfoodpreference,majorityWesternfastfoodchainshadignoredIndianmarkets.Besides,nearly20%ofIndia’sfoodproductionisdesecratedonaccountofpoorintermediaries,infrastructureandtransportations,andcreatedinefficiencybetweentheIndianfarmersandconsumersofthefoodchain.However,forinstance,agreatnumberof22,000registeredrestaurantsplus100,000roadsidefoodstallsverifythatIndiansenjoyconsumingrestaurantfoods.Regardingtoworldwatch（2009）,Indianfastfoodindustryhasbeengrowingatmorethan40%peryear.SincetheconceptoffastfoodchainiscomparativelynewforIndian,ithasagreatpotentialforgrowth.

2.1.2HighGrowingEconomysince1990s

Sincethe1990s,therewassignificantgrowthofIndia’seconomycontributedviathecountry’shighgrowingGDPandhighskewingincomedistribution.The“Hindurateofgrowth”wasfromaverage3.5%GDPin1972-1982to6%from1992-2002,andislikelytoreach7%by2010.Besides,thenumberofhouseholdswithanannualhasgrownby26%since1995-96to2001-02,andwasestimatedtoincreasecontinuously.Themiddleclasshouseholdsofthecountryinbothurbanandruralhouseholdswithhigherdisposableincomeandhaveshownsuperiortendencytoconsumefastfoods.ThismadeIndia’sfoodservicesalesindramaticprogressthatfurtheropenawindowtoMcDonald’stoenteritsindustrymarketswithlargepotential.

Figure1:

2.1.3EconomicLiberalizationReforms

Inresponsetothecountry’smacroeconomiccrisisofthefinancialgrowingbudgetdeficitsfromlate1980s,India’snewgovernmentintroducedaseriesofeconomicreformstocreatemoremarket-basedeconomy.Sucheconomicliberalizationpoliciesdidbuildamarket-friendlyenvironmenttoattractMNCsandforeigndirectinvestment.Since,thepotentiallylargeconsumermarket（with300millionconsumers,almostasbigasChina）wasopenedtoMNCslikeMcDonald’swhichwouldprovideenoughincentivesforMcDonald’stoenterintotheIndianmarket（Kishore,2005）.

2.2SocialEnvironment

2.2.1IndianSocietyOverview

Indiansocialsectionindicatedthattheirfairlydiversepopulation,uniqueregionalfoodtraditionsandpreferences（e.g.Muslimdonoteatbeefandpork,andlargevegetarianproportion）,demographicsthroughincomedistribution,rural-urbansegmentationandcentresofprosperity,thesearekeyelementsthatMNCsconsideredforlaunchingbusinessinthissociety.

2.2.2PopulationGrowthandUrbanization

GrowingurbanizationandhighincomehasshiftedtraditionalIndianfoodhabits.Highincomepeoplearenowmoreopentowardstryingdifferentvarietyoffoodssuchas,internationalcuisine,includingfastfoods.ThischangeinperceptionhasresultedingrowingnumbersofAmericanfast-foodchainsinIndia.（LaterstatisticsprovedthatcompanieslikeMcDonald’sandPizzaHuthasopenedover100restaurantseachinlasttenyears.）

2.3IndianPoliticalEnvironment

2.3.1DecreasedGovernmentControl

In1980s,economicnationalismpolicywasstilldemonstratedinIndia.Dirigiste-heavystateinterventionandautarkic-domesticcompanieswereconsideredasstronggovernmentcontrol.SevereconstraintsforMNCsviaprotectivetradepolicies,pricecontrol,licensingrequirementsintermsofrelocatingfacilities,establishingnewplants,expandingproduction,andintroducingnewtechnologystronglyhinderthein-flowofforeigncapitalandmarketactivities.Untilthe1990snewlyformedIndiangovernment,undertheleadershipofPrimeMinisterNarasimhaRaooftheCongress,aseriesofeconomicreformsaimedtoimprovethemarket-basedeconomybylowinggovernm