McDonald's - Business Strategy in India

Abstract

This case study discusses how McDonald's India managed to buck the trend in a struggling economy, its early years and business strategy to get more out of its stores in India. The case also briefly discusses how McDonald's adapted to local culture in India, its localization and entry strategy, its strong supply chain and pricing strategy. This paper talks about the beginning of McDonald's and the success story of it in the USA and abroad especially in India and the business strategies the company has adopted to be successful. Further this paper talks about the competitions the supply chains the customers and the employees of this company.

McDonald's- Business Strategy in India

McDonald's Corporation is the world's biggest chain of fast food restaurants, serving about 68 million consumers daily in 33,000 locations worldwide in 118 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Dick and Mac McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. They produced a limited menu, concentrating on just a few items burgers, fries and beverages which allowed them to focus on quality at every step. Ray Kroc pitched his vision of creating McDonald's restaurants all over the U.S. to the brothers. In 1955 he founded the McDonald's Corporation, and 5 years later bought the exclusive rights to the McDonald's name. By 1958, McDonald's had sold its 100 millionth hamburger. Ray Kroc concentrated on building a restaurant system that would be famous for food of consistently high quality and uniform methods of preparation. He initially planned to serve burgers, buns, fries and beverages that would tasted just the same in every restaurant he owned.

To achieve consistent high quality and uniform methods of preparation Ray Kroc persuaded his franchisees and suppliers to follow his vision "In business for yourself, but not by yourself" (Ray Kroc). His philosophy was based on three principles (McDonald's, the franchisees, and the suppliers). Ray Kroc maintained very strict policies to live by these principles he made it sure that every single ingredient was tested, tasted and perfected to fit the operating system. Ray Kroc died on January 14, 1984; but he never stopped working. From his passion for innovation and efficiency, to his relentless pursuit of quality, and his many charitable contributions, Ray Kroc's legacy continues to be an inspirational and integral part of McDonald's today.

All McDonald's restaurant is operated by franchisees or by corporate itself. The corporation makes its revenues from rents, royalties and franchisees fees and the sales made by the company owned restaurants. One of the biggest companies that benefited from globalization is McDonalds; it operates in 118 other countries. 66% of the 2008 sales were international operations, and 42% were from Europe. Globalization has tremendously increased the corporate finance options. McDonald's uses financial resources from international investor's to increase their outcome from the business. Increasing globalization of the market is affecting corporate finance to a great extent that include not only the benefit it of the corporate entities but also customers and clients. McDonalds focused in international expansion by maximizing the profit from the first highest expected profit opportunity around the globe and allocating resources is the best way to meet the best opportunity. McDonalds's entered the Indian markets in the year 1996 ("McDonald's in India,"). In India McDonald's is managed by two Indian entrepreneurs. It is been over 15 years McDonald's in India and it has about 235 restaurants across the country.

McDonald's competes with fast food chains like Pizza Hut, Domino's, Papa John's, Nirula's and KFC. KFC was the first multinational food chain company to enter in to the Indian Market in 1995 and was very popular; but by the late 1990 KFC had to shut down many of its location because of the protests from the animal rights group PETA. The start of McDonald's in 1996; initially it was a very tough for McDonald's to compete; but once KFC was shut down McDonald's started targeting every different kind of customers. McDonald's being a restaurant that serves only non-vegetarian food they changed their appearance to the India market. McDonald's started serving vegie burger; which attracted about 40% customers who are strictly vegetarian population in India. McDonald's is clearly poised well in terms of appeal to the majority of the Indian population. McDonald's worldwide is well known for the high degree of respect to the local culture. Keeping in line with this McDonald's does not offer any beef and pork items in India. McDonald's has also re-engineered its operations to address the special requirements of a vegetarian menu. The cheese and cold sauces used in India is 100% vegetarian. Vegetable products are prepared separately, using dedicated equipment and utensils ("McDonald's in India,"). Also in India, only vegetable oil is used as a cooking medium. This separation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, cooking and serving. According to an article by Eric Bellman in The Wall Street Journal; while much of India's retail sector is struggling , MacDonald's has been largely unaffected by the slowdown and is planning on accelerating its expansion in India. (Bellman, 2009)

Fast-food chains face a tough time balancing between margin pressures and balancing the prices which affects the volumes consequently. Affordability has been the cornerstone of McDonalds's global strategy (Kothari, 2004). McDonald's traditionally operates with local partners or local management. In India McDonald's does the same. McDonald's constructs its restaurants using local architects, contractors, labor and where possible local materials. McDonald's hires local personnel for all positions within the restaurants and contributes a portion of its success to communities in the form of municipal taxes and reinvestment. McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards. Part of this development involves the transfer of state-of-the-art food processing technology, which has enabled Indian businesses to grow by improving their ability to compete in today's international markets and helps the