Mcdonald’s Russia: Managing a Crisis

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#1. In the late 1980s, Soviet Union had brought its glasnost (openness) era. Soviet president Mikhail G. introduced the revolutionary idea of Perestroika, which refers to “economic restructuring.” Gradually, Soviet’s culture and business began to grow. The political parties began to spring up, and farmers began to sell their products on the open market. In 1987, the Kremlin passed a new law on the joint ventures, easing restrictions on the importation of foreign capital, technology, and expertise.

#2. First of all, Cohon’s idea to open a McDonald in Russia was originated at the Montreal Olympic Games where he met a group of dignitaries from the Soviet Union went in McDonald’s for snacks. When these officials entered McDonald’s, they were blown away. Second, types of restaurants in the Soviet Union was too limited, as Cohon recalled, “a restaurant was either a little hole-in-the-wall … or it was a cold, formal dining room.” Third, Cohon believed Soviet Union was a bigger market than the United States or Canada, and Russian’s diet were meat, bread, potatoes, and milk, and they can serve these with highest quality. Plus, Cohon had a very successful McDonalds’ business in Canada, and this could also inspire him to feel McDonald’s in Russia could be successful.

#3. There were four major challenges involved with opening a McDonalds in the Soviet Union. The first risk involved building a supply chain in Russia. At the end of 1980s, the Soviet agricultural system was outdated and highly inefficient. Therefore, Cohon and his team had experienced the many simplest things in the farm, such as getting the right kind of potatoes. To overcome these challenges, Cohon’s team had brought in some of the company’s top suppliers from around the world to train the Soviets from ground up.

The second risk involved creating a tightly controlled food production system in the Soviet Union. In another word, how to create best and consistently best products in the Soviet...
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