Table of Contents
The McDonald’s Brand2
Challenges for McDonald’s in India3
Cultural Sensitivity to Food4
Contention with Age old Indian Dietary Conditioning4
Prejudiced by History5
Limited Market Data5
Perceived as Expensive6
Careful Planning , Market Research:7
Strategic Operational Devices8
Expansion Possibilities for McDonald’s and Recommendations11
The McDonald’s Brand
McDonald’s is the leading global foodservice retailer with more than 33,000 local restaurants serving more than 64 million people in 119 countries each day. More than eighty percent of McDonald’s restaurants worldwide are independently owned and operated by local men and women.
In 2010, the company clocked revenue of $24 billion USD with a net income of around $4 billion USD.
The company’s “three legged stool” business model is based on the strength of the alignment among the Company, its franchisees and suppliers (collectively referred to as the System) has been key to McDonald’s success. This model enables McDonald’s to deliver consistent, locally-relevant restaurant experiences to customers and be an integral part of the communities we serve. In addition, it facilitates our ability to identify, implement and scale innovative ideas that meet customers’ changing needs and preferences.
In an order to appreciate the opportunities and challenges faced by McDonald’s in the early 1990’s its imperative to understand the economic situation prevalent during early post liberalization era. Pre liberalization Indian business environment and markets were stifled by the following issues:
1) State Control over economic matters maintained via protective trade policies ,price control , licensing requirements for companies to relocate existing facilities and practices dubbed as the “License Raj”
2) A spiraling debt crisis with inflation as high as 17%.
3) Severe constraints on the In- flow of foreign capital
4) The severely impaired and unpopular Hindu growth rate of 3.5% wherein the household income was restrictive and the very idea of eating out was out of the normal.
Post 1990 India devised new frameworks, rules and friendly market environment to attract foreign direct investments to cater to the 300 million consumer market. This size of this market was equivalent to the entire population in United States and equivalent to the consumer market in China.
And over the years, the new economy introduced changes in the Indian psyche which were conducive towards the gradual adoption of natural consumerist behavior patterns affected by:
• Pattern of growing Income left with more disposable income
• Continued Urbanization Trends
• Nuclear Families resulted by cross migratory trends across the country
• More than one person employed in an household
All and many other macro trends is reflected in one of the recent 2007 report by McKinsey Global Institute which revealed that India would join the premier league of the world’s consumer markets by 2025. With the middleclass growing by 12 times from 50 million to 583 million, the market potential was huge.
Challenges for McDonald’s in India
The several challenges that McDonald’s experienced could be bucketed under
• Cultural Differences with respect to other countries
• Limited or Underdeveloped Intermediaries to assist in Market research
• Heterogeneity of the Indian Population.
• High initial setup cost that prolongs realization of profit. o Imported expensive process control equipment