Case Study: McDonald's India
1 - Case Study: McDonald's India introduction. What are some of the contextual issues for McDonald’s in India (Describe the Indian context using Hofstede/Trompenaars/GLOBE). What are some of the more prominent social instritutions at work that will impact on this case (Religion, Government, Social institutions, Education, Politics, etc. ) Trompenaars: Particularism: After many years of studying the Indian food market, build relationships and get to know people to better understand Indian’s needs. McDonald’s was ready to get into India’s market. Indian particularism has to do with the adaptation of decision and behavior to given circumstances.
Accepting McDonald’s as part of the India’s economic liberalization and further globalization integration (BRIC), people would change their behavior on consuming McDonald’s as long as McDonald’s would adapt its products into India’s culture For example as making vegetarian hamburgers. Indians focus and care on people’s uniqueness and relationships among their relatives, friends and society in general. For this reason McDonald’s concerned on Indians food preferences and social values. McDonald’s change the name of the restaurants to ‘McDonald’s Family Restaurants’.
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This is the strength of McDonald’s in India marketing their products to the Indian families. For McDonald’s in India is crucial to remember the importance of trust in a business situation, for example a contract may be not needed, contrarily relationships are seen as a binding agreement. Relationships in business are so important because of the fact that Indians do not trust the system (laws, regulations, etc). Communitarianism: Indians for example are really cooperative when they have to work and because of their consensus – oriented culture they rarely say “no” in order to maintain harmony in the group.
For McDonald’s is good that India is a consensus-oriented culture because it is easier for them to make deals with Indians. McDonald’s found out that giving back in India is good business. India is a communitarian society they care about the community as a whole. For example the well being of others (community service) is really important in India’s society. McDonald’s have been involved in many community-related programs helping children mainly. For example the girl- child program that focus to improve the status of the girl-child in India’s chauvinist society.
Every time McDonald’s expanded to other cities it created new job opportunities. This will make McDonald’s gain official support and help its brand and reputation in Indians minds. Neutral: Majority if Indians prefer to keep their feelings controlled, it means not showing publicly affection, touching but caring about other by doing good to others. For McDonald’s it was important to use not an emotional but a neutral communication to the customers. In advertisings they show they care about Indians habits adapting their products into Indian’s dietary preferences. Diffuse:
India is a diffuse culture where everything is connected to everything. For that reason was important to McDonald to build a good relationship with the Indians. It is always recommended to take time to get to know them and become friends with them when negotiating something because of the diffuseness in the culture. McDonald’s used many strategies and a long time to get to deal with Indians officials. For McDonald’s it was easy to cooperate with them. The outcome is the problem’. The diffuseness in India can be connected to religion, Karma, Gandhi. A lot of actions are done in order to be reborn. Everything is connected.
Ascription: Even though is difficult to clearly position Indian in a category we chose ascription because of the caste system. Professional titles, age, degrees and caste level are indicators of status. Friendships and kinship are more important than expertise. So for McDonald’s was right to get those two representatives in India, not because of their expertise but because of their background and social connection with important people from India. It is deeply rooted in Indian society that if someone is from a higher caste or has a better job title he should be treated differently than one from a lower caste with another job title.
Synchronous Time: Time for Indians is seen as a cyclical and repetitive feature. Indians often do more than one activity at a time so when McDonald’s cooperated with Indians it was important for the company to “adapt” itself or at least to be aware of this way of managing time that is completely different to the monochromic American timing. In the synchronic Indian culture, people tend to “give time” to whom they have a relation. The time issue is connected to status as well. And as we know in India castes and social status are important they may give or accept tardiness from high-class people.
If McDonald’s does not adjust and know what to expect it will be impossible to do business with Indians. Outer direction: Indians see nature as something to live in harmony and in balance with. For example most of Indians are vegetarians they venerate cows (Hindus), pork (Muslims), etc. Indians believe that they must control their own destinies and this is linked with the big green sensitivity. McDonald’s interacts with the environment to attain the company’s goal that is to get into the market and expand their business; McDonald’s has fund- supported green movements in Delhi to promote environmental consciousness and a healthy lifestyle.
In this way they will help Indians promoting a good new product that globally is considered as ‘Junk food’ and change that stigma into Indians mind. The religious institution factors The regional factors in India are the main tool in differentiating these ethnic groups, with their own social and cultural identities. The religions that are practiced in the country are Hinduism, Christianity, Islam, Sikhism, Buddhism, and Jainism. The citizen can freely choose to practice any religion. As a result the religions also have impact in food preferences.
Such as Hindus don’t eat beef, that’s the reason there is no beef on the McDonalds’ menu in India. While Muslims don’t eat pork, so the company has to also emphasize that they don’t serve pork or pork by products in any McDonalds in India. The government institution The Government of India encourages people to join various health programs and provides policies to improve the citizen’s standard of living. There’s the Knowledge Center which control by Health Section to provide tips and information on diet and exercise. This center can create a bad position of McDonald as junk food brand and result in declining sales.
The result of all effort from the government section is the health conscious trend of consumers that turn to become vegetarian which lead to limited menu at McDonald. And the company also has to be creative in using vegetable to make various menus. The society Foreign brands are valued and perceived to be superior in quality. McDonald’s are seen in India as a family restaurant as the company attempt to position itself. But the one who can afford McDonald’s are those in middle, upper middle and affluent classes who were keen to have a fun and pleasurable time eating.
The consumers in the market are very price sensitive. Also, many foods for festival or important occasion is always cooked at home. Vegetarians and animal welfare campaigners They are not satisfied with the usage of meet in McDonald’s production in worldwide. McDonald’s are one of the largest users of beef. They are responsible for slaughter of many cows. The environment campaigner The McDonald’s Company is also to blame for the usage of packaging despite the promotion of itself as environmental friendly. The packages are harmful to the environment in the area nearby.
It can cause global warming, destruction of natural habitats, and etc. 2. Given the challenging country context of India, why has McDonald’s done well in India? Before coming into the Indian market, McDonalds did a great deal of preparation for Indian customer needs and wants. Unlike McDonald’s competitors——KFC and Pizza Hut immediately rushed into Indian market in the early 1990s,McDonalds spent a lot of time and energy researching about India including the Indian consumer religion and tastes. Later on, it set up a comprehensive planning and development goals and opened its first outlet in 1996.
As we all know, a good beginning is half done. Eating Habits: As you can see, in every country where the chain operates, McDonalds has offered a local variant of a classic dish in an attempt to cater to local sensitivities. In India, the major issue was beef. Cow being sacred and worshipped, beef could not be served. The majority of Indians are Hindus and as you know they do not eat beef, moreover, Muslims people do not eat pork so McDonald’s cannot serve any of these to customers. Instead, they have menu items that cater to local tastes,it provides all kinds of chicken hamburgers.
For vegetarian consumers, McDonald’s offers veggie burgers, which are very popular among the vegetarians in India. What’s more in 2013, McDonald’s is planning to open its first vegetarian outlet in India. By understanding the Indian customers’ taste, McDonald’s could be accepted by sensitive Indian people. Price: Food pricing was a sensitive issue in India. As you know,most Indians prefer to eat home cooked foods which are considered;; fresh and inexpensive. An ideal strategy was to focus on customer’s ability to pay and tap the rich and upper middleclass population in India.
So the cheap price will be a good way to attract customers. McDonalds added some cheap and fresh food on the menu to lure India’s middleclass such as breaded potato and pea patties. McDonald’s tried to make Indian customers feel like everyone could afford this popular fast food. Employment Opportunity The employment problem is always the biggest problem that developing countries face. However, McDonald’s is not just a burger company serving people; they also offer jobs for local people. Every McDonald’s restaurants in India employ more than 100 people in all kinds of positions. As of today, they employ around 2,500 people in India.
A job at McDonald’s opens the door to limitless career opportunities. Besides, every time they open a new shop, it will also bring employment opportunities to India’s agricultural work force, which is the reason why McDonald’s opened more than 200 restaurants in the past 10 years. Thus, McDonald’s arrival alleviated some of the employment pressure. Giving Back McDonald’s understand that giving back to society is an important element of a company’s brand and goodwill. Examples of corporate social responsibility by McDonald’s include creating a sustainable supply chain strategy and engaging in community based development projects.
For example, in India, the girl child’s social position is always lower than a boy. McDonald’s are working toward improving the status of the girl child and try to let them get the fair welfare as boys’. Besides, McDonald’s also introduced health programs, such as providing free polio vaccine to the 5 years old children. These will be a good way for promote McDonald’s brand image and get Indian people to welcome and accept it. Advertising: Advertising was known to have an impact on the minds and the hearts of the consumers. Advertising was the backbone of McDonald’s marketing strategy in India.
It is tapping in to family values and emphasizing its price competitiveness as it seeks to connect with consumers in India. McDonald’s aim’s to provide a clean, comfortable, and relaxing environment. Advertisements were created using storylines with focus on emotions. Through a variety of advertisements, the visit to McDonald was seemed as a special place accompanied with excitement and satisfaction especially for the youngsters. Therefore Advertising helped McDonald’s in building brand recall and establish warm image in customers’ mind. Promotion:
At McDonald’s the prime focus is on targeting children. In happy meals, targeted at children, small toys are given along with the meal. The restaurant maintained several ‘Play Zones’ to provide children with a fun experience. It also offers birthday parties, hosted by a trained McDonald’s Birthday Specialist, which is complete with cake, ice cream and gifts. So McDonald’s became a favorite place for children and teenagers of India. McDonalds even introduced unusual ice-cream flavors such as bubblegum, green apple and berry to entice the curious youngsters.
Even though Indian children don’t have the purchasing power, they will affect their parents’ decision making. Thus, McDonald’s has done everything possible to attract children. McDonald’s also offer the home-delivery for those people who prefer to stay at home because of lack of transportation. Supply Chain Management: Supply Chain is one of the most important factors for the smooth functioning of McDonald’s. It is this unmatched Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut down on its cost and maximize profitability along with aintaining highest quality standards of its products. It spend a few years setting up a unique Cold Chain, which immensely benefited the farmers at one end and enabling customers at retail counters to get the highest quality food products, absolutely fresh and at great value. This ensures a high-quality standard of food items delivered to each McDonald’s outlet. McDonald’s has performed quite well even in a country as challenging as India. It is due to their immense research efforts regarding the Indian market and the unique eating habits they familiarized with.
McDonalds’ aim was not only to make profit, it also aimed at the welfare of the Indian society by providing jobs to the unemployed. It also introduced health programs. Therefore, McDonald’s is one of the most successful fast-food chains in India 3. What are some of the future challenges that McDonald’s has to deal with in India? How would you resolve these? Since 1996, an American fast food chain like McDonald’s has established an entry to newly opened country as India.
Despite its unique diverse population of more than five thousands ethnic communities with distinct food habits, McDonald’s had witnessed an impressive growth. Not only in terms of culture but also in terms of social life of the citizens that the company has been trying hard to adjust. Liberalization of economic policies, population growth, raising income, urbanization, a shift in the traditional Indian food habits also its own expansion and India-centric management strategies are driven factors to this remarkable existence of McDonald’s in the country.
Therefore, the use of word “successful” is a bit too early for McDonald’s situation; there are some more challenges to be dealt with in nearly future. Hidden behind its positive recognition on Indian market scenario, the company takes about 5-7 years to attain the break-even due to its investment in imported expensive specialized equipments and prime location properties. Furthermore, there’s a doubt in the leading path to success, about how its growth will continue is a subject to strictly discuss. Recently, due to Indian fragmented regional cultures, McDonald’s launched ew products on a regular basis to make up the balancing the diversity and the product offerings so to please the varied preferences of consumers; the only way appealing to new generations in which the chain could continue its sales and maintain the growth, yet, it is certain to create complexity, added cost and raise the risk of error. In addition, other food chains such as KFC, Pizza Hut or even local restaurants are key factors of strong competitiveness in an active potential market as India; McDonald’s is not alone in this fight.
Despite its emphasis on local management and cultural sensitivity even social responsibility campaigns, but to be viewed as a foreign fast food chain, fatty food products company, and considering as a symbol of Americanness so American cultural Imperialism, McDonald’s still has to face oppositions from many Indian activists such as religious men, fundamentalists, environmentalists, protectionists, animal-rights activists and anti-globalization protestors exampling of having been targeted of violent protests in Delhi, Thane and Gujarat.
The expansion strategy to other cities than Delhi and Mumbai may come up in discussion so many times, although, in order to do so, the company can no longer use its well-developed processing and distribution centers near metropolis. For many parts of India are still indigents in technology; poor transportation and road facilities could lift up its costs of production and so on the price of hamburger which is a very sensible matter doing business in India since people cannot afford the price, for the Board, this would be the very last thing to do.
As to solve mentioned subjects earlier, adapting in terms of culture and consumers’ preferences are already touched the point however Market analysis in adjacent would be key factor in helping the development of the product lines. Seeing that the added costs from launching of new products on a regular basis is actually high enough to raise the price of hamburger. McDonald’s might catch on menus launched out in successful respond and makes them main items to prevent risks of attempting. As Spicy Chicken served with Thai Rice has experienced a wonderful success lately, it is in these days eld in every day’s special. Moreover, as to inciting the promotion and so does its sale, each outlet may attract target market’s attention by sending forth new products to taste on events. Another sensible issue is that of activists protesting against McDonald’s business in India. As to relieve the violent protestation, the company might use public relations to build up consumers’ trust and so being community defending barrier by launching campaigns in social benefits to demonstrate its focus on welfare of local people. Otherwise, McDonald’s has been committed in doing efforts in many of its CSR projects.
Five areas focused are nutrition and well being, sustainable supply chain, environmental responsibility, employee experience and community. Using Indianization in McDonald’s image. In order to expand its chain to other cities with remaining restraints as the poor transportation, the primary target locations might be tapped on tourist places since its brand and image are favorable and significantly recognized by passengers. Likewise, tourist places are usually equipped with better transportations and facilities, which might help reducing the additional costs.
For the prices unaffordability of local people, as an important part of Indians are from low and middle income classes range, the decision making on this type of food spending is difficult. This can represent a threat of external factor which the company cannot control even so it has to take control of internal ones to lower it at the price those can afford; to reduce costs of production to Indian standard prices. Eventually, McDonald’s can boost the curiosity by promoting campaigns as price reduction, buy 2 get 1 free or else.
The example of Mini-Hamburger with lower price is an interesting drive to try. To conclude, the way leading to success in doing fast food chain in India of powerful McDonald’s is to establish strategies to local adaptation, a good planning gives a step forward and the most important is to be relevant to their customers. 4. What are some of the important lessons one can learn from McDonald’s operation in India? Before investing in India, McDonald’s has spent a significant amount of time researching and getting to know more about Indian culture and habits.
India is a country with more issues to consider for investors than other countries. Most of the population in India is still very traditional and prefers eating home-cooked meals. McDonald’s has done many things in order to penetrate the market smoothly and keep its image. According to McDonald’s thinking referring to ‘’think global, act local”, India is a very good example. In order to follow most of India’s population’s values, McDonald’s introduced a mutton-based burger instead of using beef or pork which are usually not very common for Indian to eat.
McDonald’s has smoothly responded to a group of environmental and animal activists who opposed the entry of fast-food chains, that claimed that junk food chains destroyed ecological balance and caused severe behavioural disorders, by being green active. In other words, McDonald’s has contributed to a special fund to support green movements in Delhi as well as many other things. McDonald’s has taken into consideration the situation of low-income population in India.
The majority of households have an annual income averaging from US$1,001 to US$2,000, which is considered as very low compared to United States with an annual average income of US$63,091, therefore, McDonald’s had to set very low prices. Their prices were already very low but the restaurant was still considered as a restaurant for middle-income to rich consumers. McDonald’s has then decreased some of its products such as ice cream cone from Rs15 to Rs7 to make it affordable to everyone. McDonald’s has first launched its two first branch in Delhi and Mumbai, choosing these locations because of its 500-km radius proximity suppliers.
It also has partnered with the state-owned oil company in order to set up restaurants at gas stations to make it easier for driving consumers to take a break and enjoy their mutton-based burgers or the other large variety of products. Considering the fact that India is a country where people believe in fate, destiny and karma, McDonald’s has these ‘’lucky itch’’ thing where you just need to itch it and see if you are going to win a prize because Indian people believe that ‘’ if you are lucky, you are successful and win big’’. One very smart thing McDonald’s has thought about is the family-centric and child-centric strategy.
As India is a family-oriented country, McDonald’s has decided to focus on children and make their stores appealing to them, as children are automatically linked to family. It has positioned itself as a family restaurant and its outlets are called McDonald’s family restaurant while it is simply called McDonald’s in other parts of the world. When one of its stores opened in South Mumbai, a children’s parade was organized in order to make it appealing to children. They also have spaces reserved for children in some branches called ‘’fun zones’’, places for children to play.
Another very interesting fact is that they also promotes birthday parties with the complete package including cake, candles and toys since most of the population live in a small house which make them unable to have parties at home. In other words, McDonald’s is a kid-friendly environment. In conclusion, one can learn a lot from McDonald’s operation in India. From completely changing its menu to putting extra efforts into attracting children, the next generation population, McDonald’s has thought a lot about its expansion of market in India.
While other rushed into Indian’s market in 1990 while there was a change in political, economic and cultural landscape, McDonald’s sat tightly and took those six years planning and investigating about India’s ‘’inside’’. Some companies do not adopt the ‘’think global, act local’’ thinking and therefore do not last very long in foreign countries. As Vikram Bakshi, Managing Director of McDonald’s India says: ‘’Good Planning is absolutely necessary when you go into any country. Very clearly, you have to understand the culture; you have to understand how you intend to be relevant to the consumer in that country.
I don’t think any brand, no matter how big it is, can take the market lightly. And I think the biggest mistake is when you think you have a big brand and that everyone is overwhelmed by it. Because whatever the brand, it has to be relevant to the consumer of that country. ’’ McDonald’s in India has come through problems such as the green group who thought that fast food chains were harming for the society, but has eventually thought of ways to compensate and make things calm down and look better. Without contributing so much, McDonald’s would not have done well in India.
It really had to ‘’fit in’’ the country and act as a domestic brand. The main lessons to learn from McDonald’s operation in India are that an extended time spent on researching about the country in question might cost a lot at the beginning but will benefit even more later and help the company last longer, understand the country with the help of local people can be very beneficiary in terms of penetrating the country, and being part of charities and activities that the country’s people value could benefit the company’s image and reputation.
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