McDonald’s

1. Given the challenging country context of India, why

has McDonald's done well in India?

They emphasis on Local Management: McDonald’s give the adage of “think global, act local” a
concrete shape in India. McDonald’s decided to set up two joint ventures with two local
entrepreneurs in Mumbai and Delhi.

Green Sensitivity: In India, there is a vocal group of environment and animal activist who oppose the
entry of fast-food chain like KFC and McDonald’s. According to this group campaign, junk foods
chains like McDonald’s or KFC destroy ecological balance and cause server behavioural disorders
because of their fatty and unhealthy foods. So to encounter these negative campaigns, McDonald’s
has instituted a special fund to support green movement in Delhi. In Mumbai, in addition to financial
contributions, it sponsors various community-related activities. They have sponsored and promoted
several highly visible sports-related activities.
The Price: Since on average of each India household spends about 50% of income on food and
beverages, food prices are always a sensitive problem. Even the India middle class, despite their
much improve income, still remain very price sensitive. However, McDonald’s has successful tapping
middle class households. But in India, while McDonald’s has been able to get a larger share of rich
and upper-middleclass population, it has not been as successful at effectively tapping the middle
class and lower middle class people. Capturing the latter segment is critical as McDonald’s starts
entering into smaller cities. However, this section has mainly stayed away because of a widely
prevailed perception that McDonald’s is expensive. This is the reason why the companies cut prices
on vegetable nuggets from Rupees (Rs) 29 to Rs 19, and the soft service ice cream cone from Rs 15
to Rs 7 in 1997. Moreover, McDonald’s has been offering value meals in a range of prices such Rs 29-
Rs 89.

Supply Chain management: A well-equipped strategy QSCV (Quality, Service, and Cleanliness &
Value) was a competitive advantage to McDonald’s. To achieve this, McDonald’s considering India’s
higher import duties and foreign exchange fluctuations; it used to source its raw materials from local
suppliers to the maximum extent possible. The company sources 95% of its raw material from 38
local suppliers. The entire supply distribution is the responsibility of AFL logistics Ltd., a joint venture
between Airfreight and Coughlin in the U.S, and Radhakrishna Foodland (P) Ltd. in Thane,
Maharashtra. As India had a poor transportation & storage infrastructure, as well as lower quality
agricultural products, its decided six years prior to the opening of first restaurant in India to work
with the local Indian companies to develop product that meet rigorous quality standards McDonald’s
demands adhering strictly to Indian government’s regulation on food, health & hygiene and to
exceed the government’s standard.

Q2. How did McDonald tackle the cultural, political and economic
issues in its Indian operations?
Before we come to the issues tackled by MCDONALD, let us know about the then existing
socioeconomic status of Indian society which had a huge role to play in the acceptance of
MCDonald in India. The Indian society was then undergoing massive change in its income
and culture. There was a huge shift from the dominance of the Brahmanical culture to a new
social attitude which gradually started accepting western values and culture. Almost around
30% of the Indians had emerged to be modern, rich, urban and western with English
speaking abilities .They perceived MCDONALD to be a premiere American fast food chain.
These changes highly supported the entry and acceptance of MCDonald in India.

Now, the ways by which McDonald tackled the cultural issues are discussed below:
  MCDonald introduced various new products especially for Indian consumers in order
to blend with the local Indian culture and get accepted.
 The willingness of the company to replace its core product beef based Big Mac with
the introduction of Maharaja Mac (Mutton based burger )
 They used a rigorous testing procedure before new product development. In 1994,
the company launched veg burger in London, southhall, Ilford and Hounslow before
launching the product in India in 1996.
 They realized and respected the sensitivity of Indians pertaining to food habits. Strict
standardization was maintained and it was ensured that separate utensils were used
for cooking veg and non-veg food products. They also made sure that French fries in
India were made without using Beef tallow on it. They even used eggless ice cream
and mayonnaise.
 McDonald positioned themselves as” Family Restaurants” and targeted children as
they primary client. Hence made the outlets a friendly, hassele free environment for
children and even arranged for play places in stores of Delhi. Present day “Happy
Meals “are an extension of the same.
 They continued promoting themselves through birthday parties, cakes, candles, toys
etc.
 They launched “Music Meal“ in 2005, set up lounges for senior citizens and further
promoted the family restaurants through clean food, friendly and fun filled
experience.
 Most Indians have a sweet tooth and hence MCDONALD opened cold kiosks in
Mumbai and Delhi that served cold desserts to consumers.
 Indians believe in fate and depend on the same for their success. So it introduced
scratch and win prizes to attract consumers.
All these strategies collectively helped in increasing the market share of MCDonald to a
large extent.

Political issues faced and tackled by McDonald are as follows:

 Outlets of McDonald in Delhi and Thane were targeted by Shiv Sena led Hindu
militant groups right after the company faced issues in US due to the use of beef
extract in French fries. In return the company assured its consumers and received a
certificate from the government agency -Birhan Mumbai Municipal corporation
(BMC) to prove abut its quality.
 In 2005 an outlet in Ahmedabad was targeted by the ruling party BJP workers after
the US denied visa to the then CM of Gujrat Mr. Narendra Modi. It later subsided by
the help of police force.

Economic issues faced and tackled by McDonald are discussed below:

  McDonald needed to expand to other cities and due to the poor transport facilities
that India has, cost of production would increase as the company needs to invest in
distribution and operation related activities, purchase stores in the right locations
etc. However, it cannot gain money through increase in its product prices as India is
a price sensitive country and a lot of people still find McDonald to be expensive.
 Even today McDonald is perceived as something that rich middle class can afford
 Also there’s a huge variety of Indian cuisines so there is huge competition and again
increasing price is not an option.

Hence McDonald has tried its best to adapt to the Indian culture by facing cultural, political
and economic barriers to quite an extent.

3. What are some of the important lessons of McDonald's operations

in India?
Some of the important lessons of McDonald’s operation in India are McDonald’s
had faced with two challenges of the Indian market. First, how to avoid hurting
religious sensibilities of Indian consumers and secondly, how to avoid political
confrontation with Indian government and political activists. They were aware that
political activist can create trouble for foreign-based fast food chains, as showed in
the case of politically organized agitation against KFC in Bangalore in January 1996.
Since 80% of Indian majority is Hindus, revere cows as sacred and 150 million of
Indian Muslims do not eat pork, beef and pork have been a complete no-no from the
start. So McDonald’s introduced a mutton based “Maharaja Mac” in India, as
opposed to its flagship beef-based Big Mac elsewhere. Other items such as the
tantalizing McAloo Tikki Burger were added to the menu to lure India’s middle class,
and approximately 75% of the menu available in McDonald’s in India is Indianized
and specifically designed to woo Indian customers.

In India’s metropolitan cities, the young and rich have embraced the spirit of
American culture. American has come to be associated with success, productivity,
and a good life. This growing acceptance corresponds to the big impact of American
influence on Indian business, education, and entertainment. More importantly, the
image of McDonald’s as a premiere American fast food chain fits well with this
changing Indian socio-cultural landscape. Given the fact that an overwhelming
majority of Indian’s do not eat beef or pork, introduction of the Maharaja Mac by
McDonald’s seems to be an appropriate cultural fit. According to popular belief,
however, India is not a predominantly vegetarian country.

Indians usually spend more money on eating out and purchasing new products during festival
seasons. To capitalize on the shopping habit of Indian consumers, McDonald’s has been sought to
launch new products, the so called “fourth flavour.” They also launch another new product called
Veg Surprise a burger laced with Indian spices, achieving an impressive sale figure 40% higher than
what the company expected, due to religious festival during September and November when even
non-vegetarian Hindus turn vegetarian. Despite these challenges, the outlook is positive for
McDonald in India. It may remain a restaurant for rich and middle class people in the near future.
But these are the classes that have extra money to spend on food and entertainment. The critically
support for McDonald’s operation in India comes from an unexpected quarter.