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Case Study: McDonald’s Business Strategies in India

The modest beginnings of McDonald’s at Illinois in USA, turned out to be among the main brand names in the international scene. It has been synonymous to what is widely-accepted the fast-food concept. The company operates over thirty one thousand stores all over the world to date. It was one of the first to perfect the concept of fast service in the food industry in its early days of operations in 1955. Given that the products of the company are mainly western in character; its operations have also expanded to the Asian region. The first Indian McDonald’s outlet opened in Mumbai in 1996. In the rest of the globe, it operates thousands of store franchises that functions autonomously.

McDonald’s in India

Around the world, McDonald’s traditionally operates with local partners or local management. In India too, McDonald’s purchases from local suppliers. McDonald’s constructs its restaurants using local architects, contractors, labour 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.

Six years prior to the opening of the first McDonald’s restaurant in India, 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.

McDonald’s worldwide is well known for the high degree of respect to the local culture. McDonald’s has developed a menu especially for India with vegetarian selections to suit Indian tasted and 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 ofa vegetarian menu. The cheese and cold sauces used in India is 100% vegetarian. Vegetable products are prepared separately, using dedicated equipment and utensils. 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.

The McDonald’s philosophy of Quality, Service, Cleanliness and Value (QSC&V) is the guiding force behind its service to the customers. McDonald’s India serves only the highest quality products. All McDonald’s suppliers adhere to Indian Government regulations on food, health and hygiene while continuously maintaining their own recognized standards. All McDonald’s products are prepared using the most current state-of-the-art cooking equipment to ensure quality and safety. At McDonald’s, the customer always comes first. McDonald’s India provides fast friendly service- the hallmark of McDonald’s that sets its restaurants apart from others. McDonald’s restaurants provide a clean, comfortable environment especially suited for families. This is achieved through McDonald’s stringent cleaning standards, carefully adhered to McDonald’s menu is priced at a value that the largest segment of the Indian consumers can afford. McDonald’s does not sacrifice quality for value — rather McDonald’s leverages economies to minimize costs while maximizing value to customers. The company has invested Rs 450 crore so far in its India operations out of its total planned investment of Rs 850 crore till 2007.

McDonald’s India Pvt. Ltd. has moved an application to the government seeking permission for payment and remittance of the initial franchise fee and royalty to Mc Donald’s Corporation. The permission has been sought on two grounds: McDonald’s India would pay an initial franchise fee of $45,000 on each of the McDonald’s restaurants already franchised or to be franchised, in the future, in India; and a royalty equal to 5 per cent of the gross sales from the operations of all its Indian restaurants on a monthly basis to McDonald’s International. They currently serve around 5 million customers a day and hope to grow at the rate of 50% to 70% a year.

Business Model

Franchise Model — Only 15% of the total number of restaurants are owned by the Company. The remaining 85% is operated by franchisees. The company follows a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the Quality, Service, Cleanliness and Value propositions offered by the company to its customers.
Product Consistency — By developing a sophisticated supplier networked operation and distribution system, the company has been able to achieve consistent product taste and quality across geographies.
Act like a retailer and think like a brand — McDonald’s focuses not only on delivering sales for the immediate present, but also protecting its long term brand reputation.

Challenges in Entering Indian Markets

Regiocentricism: Re-engineering the menu – McDonald’s has continually adapted to the customer’s tastes, value systems, lifestyle, language and perception. Globally McDonald’s was known for its hamburgers, beef and pork burgers. Most Indians are barred by religion not to consume beef or pork. To survive, the company had to be responsive to the Indian sensitivities. So McDonald’s came up with chicken, lamb and fish burgers to suite the Indian palate.
The vegetarian customer — India has a huge population of vegetarians. To cater to this customer segment, the company came up with a completely new line of vegetarian items like Mc Veggie burger and Mc Aloo Tikki. The separation of vegetarian and non-vegetarian sections is maintained throughout the various stages.

Product Positioning

“Mc Donald’s mein hai kuch baat” projects McDonald’s as a place for the whole family to enjoy. When McDonald’s entered in India it was mainly perceived as targeting the urban upper class people. Today it positions itself as an affordable place to eat without compromising on the quality of food, service and hygiene. The outlet ambience and mild background music highlight the comfort that McDonald’s promises in slogans like “You deserve a Break Today” & “Feed your inner child”. This commitment of quality of food and service in a clean, hygienic and relaxing atmosphere has ensured that McDonald’s maintains a positive relationship with the customers.

Source: Docstoc.com

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Why McDonald’s failed in India? McDonald’s Entry

McDonald’s is one of the most successful and recognizable fast-food brands in the world, with over 39,000 outlets in more than 100 countries. The company has been able to achieve global success by adapting its menu, marketing, and operations to suit the local preferences and cultures of different markets.

However, not every market has been easy for McDonald’s to crack. One of the most challenging and controversial markets for McDonald’s has been India, where the company has faced several cultural, operational, and regulatory hurdles that have hindered its growth and profitability.

In this blog post, we will examine why McDonald’s failed in India and what lessons can be learned from its experience for other global brands that want to enter or expand in the Indian market.

McDonald’s Entry into the Indian Market

McDonald’s entered the Indian market in 1996, as a joint venture with two local partners: Hardcastle Restaurants Pvt Ltd (HRPL) and Connaught Plaza Restaurants Pvt Ltd (CPRL). The company had to overcome several challenges to establish its presence in India.

Cultural Factors

Dietary preferences.

The most significant challenge that McDonald’s faced in India was the dietary preferences of Indian consumers, who are predominantly vegetarian and have religious restrictions on consuming certain foods, such as beef and pork.

To cater to the Indian market, McDonald’s had to eliminate beef and pork from its menu, and introduce vegetarian options, such as the McAloo Tikki burger made of potato and peas. The company also had to segregate its kitchens and utensils to avoid any cross-contamination of vegetarian and non-vegetarian products.

Traditional eating habits

Another challenge that McDonald’s faced in India was the traditional eating habits of the Indian consumers, who prefer local flavors and spices, and value home-cooked meals over fast food.

McDonald’s had to customize its menu and ingredients to suit the Indian palate, such as adding more spices, sauces, and cheese to its burgers and offering regional specialties, such as the Maharaja Mac, a chicken burger with Indian spices.

The company also had to compete with the established local fast-food chains, such as Haldiram’s, Nirula’s, and Jumbo King, which offer similar products at lower prices and have a loyal customer base.

Challenges in Adapting to Local Preferences

Customizing the menu.

Despite McDonald’s earnest attempts to tailor its menu and marketing to local tastes, the company encounters ongoing challenges in engaging and retaining Indian consumers, known for their price sensitivity and relatively low per capita income.

In order to compete with local alternatives like street vendors and dhabas, which offer economical and substantial meals, McDonald’s had to implement a cost-effective strategy.

However, this approach adversely impacted the profitability and quality of McDonald’s offerings, necessitating compromises on portion size, ingredient quality, and service standards.

Managing Price Sensitivity

Another hurdle faced by McDonald’s in India pertained to the intricacies of supply chain management, critical for upholding product quality and consistency. McDonald’s opted to source its ingredients locally to mitigate costs and comply with local regulations, as importing ingredients would be expensive.

However, identifying dependable and high-quality suppliers in India proved challenging, given the country’s fragmented and underdeveloped agricultural sector, coupled with inadequate infrastructure, transportation, and storage facilities.

McDonald’s responded by making substantial investments in developing its proprietary supply chain network and engaging in comprehensive training and monitoring of suppliers to ensure adherence to global standards of quality and hygiene.

Read : Is the restaurant business profitable in India?

Navigating Operational Challenges

Challenges in the supply chain.

McDonald’s encountered substantial operational hurdles in India, impacting its expansion and overall performance. Central to these challenges was the franchise model embraced by McDonald’s to establish itself in the Indian market.

McDonald’s formed partnerships with two local entities, HRPL and CPRL, granting them exclusive rights to operate outlets in specific regions. However, this model triggered conflicts and disputes between McDonald’s and its partners, as well as disputes between the partners themselves. Issues such as royalty payments, management control, and brand reputation fueled tensions.

The most noteworthy dispute unfolded with CPRL, resulting in the closure of 169 outlets in the northern and eastern regions in 2017. The termination of the franchise agreement led to legal battles, public conflicts, and customer dissatisfaction, tarnishing McDonald’s image in India.

Resolution came in 2019 when McDonald’s acquired CPRL’s stake, establishing a wholly-owned subsidiary, McDonald’s India Pvt Ltd (MIPL), to oversee operations in the northern and eastern regions.

Complexities of the Franchise Model

Another operational challenge for McDonald’s in India revolved around compliance with intricate, inconsistent, and unpredictable local regulations. Securing various licenses and permits from entities such as the Food Safety and Standards Authority of India (FSSAI), the Municipal Corporation of Delhi (MCD), and state governments became a necessity for operating outlets.

However, these processes often faced delays, cancellations, and renewals, disrupting McDonald’s operations and expansion plans. Notable incidents include the temporary closure of 43 Delhi outlets in 2014 due to expired health licenses issued by the MCD.

In 2015, the popular McAloo Tikki burger was recalled and discontinued due to the FSSAI’s ban on potassium bromate, a food additive . Additionally, in 2016, McDonald’s faced a fine of Rs 650,000 for violating the plastic ban imposed by the Maharashtra government.

Marketing and Brand Perception Challenges

Challenges in image and perception.

McDonald’s encountered formidable hurdles in marketing and establishing its brand in India, a nation with a highly competitive and diverse fast-food industry. The company grappled with image and perception issues, notably the prevalent view of fast food as unhealthy and negative associations with Western brands.

This challenge was exacerbated by the surge of anti-globalization and nationalist sentiments in India. In response, McDonald’s sought to address these concerns through marketing campaigns, prominently featuring slogans like “I’m lovin’ it” and “McDonald’s mein hai kuch baat.” The company endeavored to emphasize quality, hygiene, and social responsibility.

Additionally, McDonald’s aimed to resonate with Indian consumers by spotlighting its local and vegetarian offerings, exemplified by campaigns such as “What’s your veggie?” and “Har cheez mein veggie.”

Despite these efforts, McDonald’s faced persistent negative publicity and criticism from various quarters, including environmentalists, health activists, and religious groups. Accusations ranged from harming the environment to promoting obesity and disrespecting Indian culture and values.

Competition with Local Brands

McDonald’s also confronted intense competition from well-established local brands boasting a robust presence and a loyal customer base in the Indian market.

This competition encompassed local fast-food chains like Haldiram’s, Nirula’s, and Jumbo King, which provided similar products at more affordable prices and with greater variety and customization.

Traditional Indian food outlets, such as chaat, samosa, and dosa stalls, posed further challenges by offering authentic and diverse Indian flavors and cuisines.

McDonald’s struggled to compete with these brands due to their deeper understanding of Indian consumer behavior and preferences, coupled with a more favorable brand perception and reputation in the Indian market.

Regulatory Hurdles

Adherence to local regulations.

McDonald’s confronted substantial regulatory challenges in India, significantly impacting its operations and expansion efforts. The company had to navigate local regulations’ intricate, inconsistent, and unpredictable landscape.

Compliance required securing various licenses and permits from entities such as the Food Safety and Standards Authority of India (FSSAI), the Municipal Corporation of Delhi (MCD), and state governments to operate outlets.

Unfortunately, these licenses and permits were frequently plagued by delays, cancellations, and renewals, disrupting McDonald’s operations and hindering its expansion plans. Notable instances include the temporary closure of 43 outlets in Delhi in 2014 due to the expiration of health licenses issued by the MCD.

In 2015, McDonald’s faced challenges when it had to recall and cease selling the McAloo Tikki burger, one of its popular products in India, following the FSSAI’s ban on the use of potassium bromate, a food additive. Further complicating matters, in 2016, McDonald’s incurred a fine of Rs 650,000 for violating the plastic ban imposed by the Maharashtra government.

Lessons from McDonald’s Experience in India for Global Brands

McDonald’s encounter in India imparts valuable lessons for global brands eyeing entry or expansion in this market. Some pivotal takeaways include:

Cultural Sensitivity as a Cornerstone: Emphasize the criticality of cultural sensitivity. Global brands must comprehend and respect the diverse cultural and religious sentiments of Indian consumers. Avoid actions or products that might cause offense or alienation. Adapt menu offerings, marketing strategies, and operations to align with local preferences, steering clear of imposing foreign standards or values.
Menu and Marketing Customization: Prioritize customization and adaptation in both menu and marketing strategies. Global brands should offer a diverse array of vegetarian and non-vegetarian options, incorporating local flavors and ingredients. Tailor approaches to suit regional and seasonal variations. Communicate the brand’s value proposition and differentiators to Indian consumers, highlighting aspects such as quality, hygiene, and social responsibility. Use local languages, celebrities, and media channels for effective communication.
Collaborative Partnerships with Locals: Advocate for collaboration with local partners possessing expertise, experience, and a robust network within the Indian market. Such partnerships can aid in navigating the intricate regulatory and business landscape. Maintain transparent and healthy relationships with local partners, striking a balance between global standards and local adaptations.
Strategic Pricing and Positioning: Adopt a strategic approach to pricing and positioning. Global brands should carefully consider the affordability and perceived value for Indian consumers. Compare offerings with local alternatives, segment and target potential customers based on income, lifestyle, and preferences. Provide diverse options and benefits aligned with the varied needs of the consumer base.

McDonald’s failure in India is a case study of global brands’ cultural and operational challenges in entering and expanding in the Indian market. McDonald’s faced several hurdles in adapting its menu, marketing, and operations to the Indian culture and taste, competing with the established local brands, and complying with local regulations.

McDonald’s also faced several disputes and conflicts with its regional partners, which affected its image and credibility in India. McDonald’s experience in India teaches us the importance of understanding and respecting the local markets and consumers and customizing and adapting our products and services to suit their needs and preferences.

It also teaches us the importance of collaborating with local partners and adopting a strategic approach to pricing and positioning our offerings in the market. By learning from McDonald’s mistakes and successes, we can hope to achieve better results and outcomes in the Indian market and in other emerging and diverse markets around the world.

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McDonald's fight with 62-year-old Indian businessman: What's it really about?

The national company law tribunal's strongly worded judgement gives vikram bakshi the edge in his battle with mcdonald's, but the fight is far from over..

Print Edition: Aug 13, 2017

Vikram Bakshi in front of a McDonald's outlet in Delhi-NCR. Picture: Vivan Mehra

For 62-year-old Vikram Bakshi, who owns half the stake in the US fast food restaurant chain McDonald's North and East India operations, July 13 (2017) might have been one of his best Thursdays ever. On this day, the National Company Law Tribunal (NCLT) in Delhi ordered his reinstatement as the managing director of Connaught Plaza Restaurants Pvt. Ltd (CPRL), the 23-year-old 50:50 joint venture (JV) between Bakshi and McDonald's India Pvt. Ltd (MIPL). CPRL is the master franchisee for MIPL in North and East India.

Bakshi and McDonald's have been at loggerheads ever since he was unceremoniously ousted as the Managing Director of CPRL in August 2013.

"The proceedings of the meeting of the Board of Directors held on 06.08.2013 relating to re-election of Mr Vikram Bakshi as the Managing Director of the Company are set aside and declared illegal, unjust and mala fide," the judgement says. "The status of Mr Vikram Bakshi as Managing Director is restored."

What led to McDonald's loss of trust in its partner who had once been the very face of the brand in India? Bakshi's real estate business was part of the problem. McDonald's alleged he had leased out his property to a rival company, hinting at a conflict-of-interest scenario.

He was also accused of financial bungling at CPRL. The US firm said Bakshi had pledged 51,300 of his CPRL shares to get a loan of Rs 20 crore so that his company Ascot Estate (Manesar) Pvt. Ltd could develop the Savoy Outlet Mall and service apartments in Manesar. McDonald's said he did not take the company's approval before pledging his shares. It also pointed at a 2007 transfer of Rs 7 lakh from the company's account to his group company called Vikram Bakshi and Company Pvt. Ltd. This action further "highlighted glaring inadequacies with respect to internal control systems", Bakshi's focus on his other businesses and the directorship of 25 other companies. In brief, McDonald's said Bakshi was being selfish and not devoting enough time to CPRL.

NCLT's 134-page ruling is scathing and quashes almost all these allegations. It also seeks to avoid a repeat of August 2013 by appointing former Supreme Court judge Justice G. S. Singhvi as an administrator with the power to vote in CPRL's future board meetings. Justice Singhvi can also, if needed, alter articles of association of the JV to avoid any further attempt at ousting Bakshi as the managing director unjustly and unfairly.

The kid gloves might have come off only after that fateful August board meeting, but the first sign of trouble was there in 2008. It was when McDonald's offered to buy Bakshi's stake for $5 million and later for $7 million (see The Timeline). In response, Bakshi waved a valuation done by Granton Thornton that put the enterprise value of CPRL at $200 million and demanded $100 million for his shares.

In stark contrast, Hardcastle Restaurants Pvt. Ltd (HRPL), which manages McDonald's franchise in South and West, is going through a purple patch. Its revenue has grown at an average 20 per cent per annum over the past seven years and seems to be getting better. "For the past eight quarters, we are the only brand in the quick service restaurants category that has positive same-store sales year on year. Even during the demonetisation-affected November quarter, we grew at 5 per cent," says Amit Jatia, Vice Chairman at Westlife Development Ltd of which HRPL is a subsidiary. "We are looking at doubling our base every three to five years, and the number of outlets will grow from 258 to 450-500 with an investment of Rs 700-750 crore."

HRPL's strong growth underlines the potential that CPRL has missed although in 2012, both companies were roughly in the same bracket. Bakshi says CPRL had planned to open at least 100 new stores during 2013-17, which could not happen.

More Hurdles Ahead

Bakshi's reinstatement as the head of the company does strengthen his case, but it is just one chapter in what promises to be a long-drawn-out legal battle. McDonald's has the option to file an appeal against the NCLT ruling in the National Company Law Appellate Tribunal (NCLAT). Post that, either of the parties can go to the Supreme Court. Given the snail-paced judicial system that weighs the country down, it may mean decades before a final binding verdict comes in.

A verdict on the arbitration proceedings in the London Court of International Arbitration is also on the anvil. It will help Bakshi if that goes in his favour, but a contrarian ruling will complicate matters.

"This is by no means the end of the road. McDonald's has many legal options to seek a quashing of the NCLT order. It will surely file an appeal against it at NCLAT," says a lawyer requesting anonymity. "This judgement does tilt the scales in favour of Bakshi and based on this, his lawyers will argue strongly in other forums. But ultimately, the partners could be better off settling the disputes among themselves."

Bakshi, too, is under no illusions of a speedy settlement. "Its [McDonald's] strategy is to play the waiting game and bleed me out, but I have also dug in," he says. "I have won the battle, but the war is still on. But it has given me the confidence to continue my fight." ~

@sumantbanerji

McDonald’s battles to regain control of brand in India

McDonald’s has 430 restaurants across India

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Kiran Stacey in New Delhi

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McDonald's restaurants across north India are still open and selling their McAloo Tikki burgers six weeks after losing their contract to do so, as the global fast-food chain battles to regain control of its brand from its local business partner.

In August, the fast-food group cancelled the franchise agreement for its 169 restaurants in north India following a nine-year conflict with New Delhi property tycoon Vikram Bakshi, its partner there since 1996.

Yet six weeks later, the restaurants are still open and Mr Bakshi remains in charge, with McDonald’s now involved in several parallel lawsuits.

McDonald’s opened its first restaurant in India in 1996 — its first outlet not to serve beef or pork — as part of a joint venture with Mr Bakshi called Connaught Plaza Restaurants. It now has more than 400 restaurants across India, serving dishes such as the Maharaja Mac, a chicken version of the Big Mac, and the McAloo Tikki burger, a spicy potato patty in a bun.

McDonald’s has told its Indian suppliers that it has cancelled the franchise agreement, but most have continued to sell to Connaught Plaza, because their contracts are with the Indian joint venture rather than the US fast-food group.

McDonald’s said the ending of its franchise agreements means Connaught Plaza “is no longer authorised to use the McDonald’s system and its associated intellectual property. We are now in the process of working to enforce our legal and contractual rights consequent on termination through the appropriate legal forums”.

Connaught Plaza insists it has the legal right to serve branded food and drinks following a ruling from an Indian tribunal that McDonald’s should reinstate Mr Bakshi as chief executive and not “interfere with the smooth functioning” of the business.

Madhurima Bakshi, a director of the company and Mr Bakshi’s wife, said: “This is way beyond smooth functioning, by cancelling the franchise McDonald’s is being very interfering.”

The US group has just one other option, according to those close to the dispute: to physically remove its branding from Mr Bakshi’s stores. But one person who has advised McDonald’s said: “We would not want to be in the situation of physically going and stopping him.”

For Mr Bakshi, the dispute is an example of a global behemoth bullying a local partner. But for people close to McDonald’s, it is a sign of the difficulties many international companies have when trying to do business in a country where contractual wrangles are common and legal processes tortuous.

McDonald’s and Mr Bakshi first fell out in 2008, when the US company tried to buy him out of their joint venture for far less than he thought it was worth. The dispute rumbled on — in both the boardroom and the courts — before coming to a head in August when McDonald’s unilaterally cancelled its franchise agreement.

Mrs Bakshi, who said she and her fellow directors were willing to sell their stake for a fair value, said: “If they tried to remove our signage, we would involve the police. There is a lot that can go wrong if you try and physically disturb a running business.”

India is Asia’s third-biggest fast-food market, worth $18.9bn according to Euromonitor.

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How mcdonald's closing nearly half of its restaurants in india will impact operations.

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McDonald’s recently announced that it was shutting down 169 of its 430 outlets in India, following the termination of its franchise agreement with CRPL (Connaught Plaza Restaurant) due to alleged breach of franchise terms. This decision comes after a long, drawn out battle between McDonald’s and the Managing Director of its franchise partner that included allegations of financial irregularities . Following this dispute, in June McDonald’s temporarily shut 40 restaurants in northern India due to non-renewal of licenses. With the termination of the current franchise agreement, the company will no longer operate in northern and eastern India until a new partner is found. This bold decision by McDonald’s could also be a negotiating tactic with the existing franchisee, since the company has terminated the contract without a new franchise partner in place. It also indicates that the company is not willing to put up with franchisee irregularities at any cost.

While this appears to be the outcome of a specific dispute between McDonald’s and one of its franchise partners, it impacts the company’s brand and operations in a region where it is already lagging behind competitors. Although the number of restaurants McDonald’s operates in India is not significant relative to its 36,000+ restaurants globally, this calls into question the broader franchise-based expansion model, especially in developing nations where strict adherence to terms might be less likely.

Expansion In India Can Be Impacted

McDonald’s entered the Indian market before most other U.S. chains such as Burger King and Wendy’s; however, the company could not capture much of the growth in the Indian quick service restaurant market. For example, Domino’s Pizza commands a nearly 16% share in the Indian chain food service industry, while McDonald’s has been able to manage to capture just 7.5% of the market. Before the announced closure, there were fewer than 450 McDonald’s restaurants in India while Domino’s has more than 1,000 restaurants in the country. While this is partly due to customer demand, McDonald’s slow growth in the region can also be attributed to franchise troubles. The India quick service restaurant market is projected to grow to over $4 billion by 2020 , and faster expansion in the region can help McDonald’s capture this growth. While the country does not contribute meaningfully to McDonald’s overall revenues currently, faster growth in India could certainly boost its long-term growth prospects. Franchise troubles can impact this expansion adversely.

Reexamining The Franchise Model Of Expansion

While companies such as Starbucks are adopting a mixed model of expansion (company owned and franchises), McDonald’s is moving towards a primarily franchised model. This model is more profitable, but can come at the cost of franchisee issues, which can impact brand reputation and expansion. McDonald’s reputation in India had taken a hit due to the ongoing issues, which likely impacted its long term growth prospects. However, we believe the franchisee model is still likely to work in most markets. As mentioned above, India does not contribute significantly to McDonald’s revenues - however, the company may need to reexamine its strategy in the region in order to capture the long-term growth opportunities it provides.

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How to win over a challenging market as India: Inside McDonald’s success story

How to win over a challenging market as India: Inside McDonald’s success story

As Westlife Development Ltd's McDonald celebrates its 25th anniversary in India this year, we speak to Arvind RP , Director - Marketing and Communications, McDonald’s India (West and South) about the brand's marketing milestones.
We discuss several phases of transformation that the brand has gone through over the years to become India’s one of the most trusted brands.

View this post on Instagram A post shared by McDonald's India (@mcdonalds_india)

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McDonald's in India

By: Kishore Dash

McDonald's relative success in India has several important lessons for global MNCs that are interested in exploring the challenges and opportunities in emerging markets. Given the unique cultural…

Length: 25 page(s)
Publication Date: Sep 6, 2005
Discipline: General Management
Product #: TB0103-PDF-ENG

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McDonald's relative success in India has several important lessons for global MNCs that are interested in exploring the challenges and opportunities in emerging markets. Given the unique cultural space of India, where most people do not eat beef and pork, where most people prefer vegetarian foods, and where people's food habits are dominated by regional food preferences, how could a beef-based hamburger chain achieve success? This case analyzes McDonald's carefully planned context-specific strategies for its business growth in India.

Learning Objectives

Analyze a global MNC's business growth strategy in an emerging market (India)

Country context analysis

Country context and a global MNC's business growth strategy fit

Sep 6, 2005

Discipline:

General Management

Geographies:

Industries:

Food industry

Thunderbird School of Global Management

TB0103-PDF-ENG

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Case Study of Vikram Bakshi v/s McDonald's India Private Limited

A person should reside in the NCR region
A person should devote substantial time to the company
A person should be holding 50 per cent shares of the company
A person should discharge his responsibility faithfully and competently.
Partner personally fails to maintain his principal residence in the National Capital Region of Delhi or fails to devote his full business time and best efforts to JV Company;
Partner terminates or suffers the termination of his relationship as Managing Director of JV The company, other than his death or incapacity. In the event of his death or incapacity, Paragraph 29(d) shall govern; or
Upon expiration or termination of the agreement.
Cannaught Plaza Restaurants Limited
McDonald's India Private Limited
Companies Act 1956
The Companies Act 2013

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Reasons For McDonaldâ€™s Failure In India

2,652 Words Published On: 12-08-2016

About McDonald's

Why or in which circumstances did western well-known business fail in India?

McDonald’s is one of the greatest restaurants famous for serving fast food and hamburger. In around 119 countries around 68 million customers are served on a daily basis. There are a total of 35,000 branches of McDonald’s. It is well known for its excellent food. The headquarters of McDonald’s is situated in The United States. The restaurant was first started as a barbecue restaurant in the year of 1940. The company was opened by Maurice and Richard McDonald. The mission of the restaurant is to become friendlier to the customers and be one of the favorite places of the customers. Soon they started to sell hamburger which became a super hit item among the customers. In 1955, Ray Kroc started to own the company as a franchisee. Soon he purchased McDonald’s restaurant from the original owners and started to popularize the restaurant and made it a world famous one.

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There are many franchisees of McDonald’s spread across the country. The world’s 2 nd biggest private employer is McDonald’s. Apart from serving world famous hamburgers, it is famous for its mouthwatering sandwiches, different kinds of breakfast items, chicken wraps, aerated drinks and different types of fries and desserts. In response to the customer’s desire, the menu also includes salads, fish etc. Soon McDonald’s set its foot in India and started to operate and sell its products through different outlets in India. In 1995, with the help of two partners, McDonald’s started to be operative in India (Vasudevan, 2007).

But McDonald’s could not prosper or live up to its expectations and hold on to its popularity as it had gained in western countries.

Under which circumstances or conditions did the company fail in India?

Undoubtedly, the launch of McDonald’s was a big news in India but due to some circumstances and conditions it failed to prosper. It had high hopes of gaining success, but it failed to live up to it.

First and foremost, the Management did not understand the true meaning of ‘localize or localization’ The Management of the corporation had a western approach which they tried to follow in India. The two countries India and The United States are different from each other in every respect like economic, social, and others. People of the countries are different and so are their cultures, values, morals, beliefs. So understanding the needs and wants of the local people was the most important factor to achieve its aims. However McDonald’s failed to understand the mentality and the way of thinking of the common men. Hindus are forbidden from eating beef but McDonald’s items used beef and the Management believed that the beliefs of the common men will be changed over a span of time. However, the attitudes and beliefs of the people never changed and McDonald’s had to face a lot of criticism which reduced its popularity. So it failed to adapt the culture and tradition of the local people of India. They introduced the Maharaja Mac to change the tasting habits of the people and it took years to realize the craze for vegetarian food of Indian citizen.

McDonald’s in India

In protest to curb the use of ‘beef’ by Management, the Bharatiya Janata Party (BJP) protested against it. Few outlets of McDonald’s situated in the Thane area of Mumbai were shattered by local people.

It wasn’t at all easy for the Management to understand the beliefs of Indian citizens. To execute the task of slaughtering of cows and using meat created a big issue in the market. Slaughtering of cows is considered to be an unholy act and is never supported by the Hindus. It was truly difficult for the Management to carry out such tasks in India. According to the Hindu religion, the cows are considered as sacred as mothers. The Hindus worships cows and slaughtering of thousand of cows by the management of McDonald’s created a rage among them and they started to protest.

One of such biggest issues faced by the team was during the launch of any new product. During any launch, McDonald’s could not predict or understand the demand of its food items because they already had a bad reputation in the public. Indian citizens were also not sure about which ingredients were being used to prepare the food items as they are strictly opposed to eating beef products. Also they were confused about the kind of oil that was being used to make the product. They had a belief that McDonalds used beef fat to fry the products instead of using vegetable oil. So launching a product and getting a huge response was really a tough thing to achieve considering the attitudes and believes of the Indians. Since they were unsure of the products or the ingredients, they stopped eating or dinning out at this food joint. The Management started to face constant challenges due to such problems.

Another reason of failing in India, companies like McDonald’s was very overconfident of themselves and they believed that they understand India very well. India is a diverse country with different people from different cultural background. So it is really not an easy task to understand a country and its diversities. McDonald’s failed to understand the country and the values of the people of India.

Also most of the population can speak English but the thinking of Indians is never the same as the westerners. Although being a democratic country but the country is still run by the leaders. India’s thoughts about leadership and hierarchy are very different as still a leader controls the whole management. The leaders are considered to be the heads of the company and they are well known for their personality. Difference in the way of working and operating can also be considered as one of reasons for failure.

It is certainly difficult for a person who hails from western countries to come and operate its business successfully in India. The rules and regulations which are followed in the western countries are not the same which are followed in India. The westerners have a habit of following the legal system and thus the rules and regulations related to it. But the Indians do not generally work as the way the westerners do as Indians have a common hatred towards rules and they very well know how to adapt to short cut processes to become successful. (Vasudevan, 2007).

Why did McDonald's fail in India?

The solution to these challenges is McDonald’s should try to sell different kinds of vegetarian items instead of selling beef and pork products. As most of the Indians are vegetarian, they would certainly enjoy their meal and also it won’t hurt the sentiments and the emotions of the common men (Miller, 2012).

The following data is a survey made on different sections of people in order to understand consumer preferences, and impact of sales.

Q1. What kind of food are you fond of?

Homemade food
McDonald’s

Q2. What kind of food do you prefer?

Non-vegetarian
Prefer to eat both of them

Q3. If McDonald’s stops selling beef, will you visit the outlet?

Won’t stop visiting the outlet
Will stop visiting the outlet
Won’t visit even if it sells foods made of beef and pork

Q 4. What will your reaction be if McDonald’s introduces few vegetarian items in its lunch?

Will enjoy meal more
Vegetarian food will be more famous than non vegetarian food
Whatever food is sold, whether vegetarian or non-vegetarian food, won’t visit the restaurant

Q5. Did McDonald’s reduce its popularity by selling beef and pork products?

Yes, beef products reduced its popularity
Beef products are of good taste
Doesn’t matter whether it is vegetarian or non vegetarian food

Q6. How would the restaurant react against the protests made by the Hindus?

They will counter protest and try to seek a solution
They will stop selling non vegetarian products
They will leave India and go back to the western countries.

Q7. What will happen if McDonald’s shuts down all its outlet?

People will miss the mouthwatering sandwiches, and hamburgers
It won’t matter much if McDonald’s goes away from India
People will try other food joints which serve same food like McDonald’s.

Every research has an objective and this research is no exception to that. The first and foremost objective of the research is to understand the impact of food of McDonald’s in the life of the Indians. McDonald’s is famous for serving hamburgers, sandwiches and different types of breakfast dishes and desserts. But people are of the opinion that McDonald’s sell items which are made of beef and pork. So the research aims at after being severely criticized by Indian citizens for serving beef products, they will still continue to do their business in India or flee away. Also the research tries to find out the reasons and circumstances of McDonald’s failure in India.

As mentioned, the research points out the specific reasons of McDonald being criticized by public. Being a western organization, McDonald’s could not match or adapt to the beliefs and attitudes of Indian citizens. Hence it started selling beef and pork products which outraged the BJP and the Hindus. They protested against the company and urged them to stop selling the products. Also through research methodology, the researcher tries to find out what percentage of the population would still prefer to eat at McDonald’s. For such people it really does not matter whether the outlet serves vegetarian or non vegetarian food. These people are die heart fans of McDonald’s and no matter what the situation is they will continue to support the eatery. Next, also the researcher tries to observe the ways McDonald could get back their initial position and reputation. By following some techniques, McDonald can bring back the faith in the minds of the common people about the quality of their food (Mauborgne, 1987).

The objective of the research can be fulfilled by choosing the right methodology of the research. In this research, the survey methodology has been used. In order to understand how many people are in favor and against McDonald’s, face to face interviews are also conducted. To understand customer preference, one of the important methods of research has been chosen. This survey research is used to understand the beliefs, thoughts, behavior and opinion of people. The survey method consists of a group of questions which is given to a particular section of people. The result of the test is collected to analyze the general behavior of the common men. Here, in this research, a questionnaire is given and asked a section of people to respond to the questions. Based on the responses of the questions, the likes and dislikes of common men can be understood. Survey method is the best method while assessing the likes and dislikes of people about any organization. The survey research gave numeric data which helped in getting the outcome.

In the Survey method, mostly young people were asked to participate. Young people particularly in the age group of 20 to 50 were selected to respond to the questions. There has been a reason behind choosing youngsters as they mostly visit eateries like McDonald’s to eat out. Around 30 people were requested to participate in the survey research. They were given the set of questions and their responses were collected in order to come to a decision.

The selection of the location is also an important factor in conducting a research. Hence one of the busiest streets need to selected to conduct the research. In the Melbourne City, Fawkners and Flinders street was chosen for the research. Here, different people from different cultures live. Many Indians are also found to live in this part of the city.

Although the research seemed to be carried out smoothly, but there had been many challenges faced while conducting the research. The research was difficult to carry out as it proved to be time consuming. Many people did not cooperate while the survey method of research was being carried out. They did not want to share their views and this was one of the implications. Sometimes some people were over friendly and they spent a lot of time which resulted in wastage of time (DeBres, 2005).

As mentioned, a section of people were selected to give responses to some predetermined questions. Out of them, a percentage of 65 supported McDonald’s and gave positive responses. According to them, McDonald was one of the biggest food joints and they really did not care about vegetarian or non vegetarian food that the outlet served. The rest of the people were against McDonald’s and felt it should leave India as it hurt the general sentiments of Indian people by selling beef and pork products. They ate vegetarian food and they were the worshippers of cow and selling beef and pork products was not at all supported by them.

A graphical representation has been used here to show the numeric values of the research:

Conclusion:

In conclusion, it can be said that McDonald’s is no doubt a world renowned organization. They serve excellent and high quality food. However after coming to India, they could not be as successful as per expectation.

They were believed to serve beef and pork products which proved to be very detrimental for them. As Hindus worship cows and consider them very sacred, so they were extremely angry and showered their anger with the help of several protests. Hence McDonald came out with other options like selling vegetarian food and thus got back its popularity.

References:

McDonald, J. (1992). Reasons for failure. The TQM Magazine , 4 (4).
DeBres, K. (2005). Burgers for Britain: a cultural geography of McDonald's UK. Journal of Cultural Geography , 22 (2), 115-139.
McDONALD, J. J. (2007). Confronting Jim Crow in the ‘Lone Star’capital: the contrasting strategies of African-American and ethnic-Mexican political leaders in Austin, Texas, 1910–1930. Continuity and Change , 22 (01), 143-169.
Chan Kim, W., & Mauborgne, R. A. (1987). Cross-cultural strategies. Journal of Business Strategy , 7 (4), 28-35.
Miller, J. (2012). A Whole New Ballgame: Analyzing and Understanding India's Emerging Middle Class Market (Doctoral dissertation).
Hargreaves, J., & McDonald, I. (2000). Cultural studies and the sociology of sport. Handbook of sports studies , 48-60.
Holmes, R. M., & Holmes, S. T. (Eds.). (1998). Contemporary perspectives on serial murder . Sage Publications.
Tinker, G. E. (2004). Spirit and resistance: Political theology and American Indian liberation . Fortress Press.
Wearing, S., & McDonald, M. (2002). The development of community-based tourism: Re-thinking the relationship between tour operators and development agents as intermediaries in rural and isolated area communities. Journal of Sustainable Tourism , 10 (3), 191-206.
Vasudevan, A. (2007). Bridging the Cultural Chasm: Winning Strategies for Global Businesses in India (Doctoral dissertation, University of Cincinnati).
Warren, D. (1974). Cultural Studies in Indian Education. BIA Education Research Bulletin , 2 (1), 2-18.
Gagne, L. (2011). Catholic Social Teaching in Global Perspective. Edited by Daniel McDonald, SJ Maryknoll. Journal for Peace and Justice Studies , 21 (2), 116-119.

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Navigating the Challenges: McDonald's Success Story in India's Booming Mark

Author: LSC Editors

Date: 23rd January 2023

McDonald's, the world's largest fast food chain, has been expanding its global footprint for decades. Its entry into India in 1996 marked a significant milestone in its international growth strategy and has since become one of the company's largest and fastest-growing markets. In this article, we will examine the factors that contributed to McDonald's success in India and the challenges it faced in expanding into this dynamic and complex market.

Market analysis

Before entering any new market, it is crucial for companies to conduct a thorough market analysis. This involves understanding the local culture, consumer preferences, and regulations, as well as the competitive landscape. In the case of McDonald's, India presented a unique set of challenges. The country has a predominantly vegetarian population, and it was crucial for the company to adapt its menu offerings to meet the specific dietary restrictions of this market. Additionally, India has a highly competitive fast food market, with a variety of local and international players. In order to succeed, McDonald's had to carefully analyze the market and develop a strategy that would differentiate it from its competitors.

Adapting to local tastes

One of the key factors in McDonald's success in India has been its ability to adapt its menu offerings to meet the local tastes and preferences of Indian consumers. This includes offering a range of vegetarian menu options, including the hugely popular "McAloo Tikki" burger, made with a vegetarian patty made from potatoes and spices. The company also adapted its cooking processes to meet the strict Hindu ban on the consumption of beef and pork, which are popular ingredients in many of its menu offerings in other markets. By offering a menu that appeals to Indian consumers, McDonald's has been able to differentiate itself from its competitors and establish a strong reputation in the market.

Partnering with local suppliers

Another important factor in McDonald's success in India has been its strategy of partnering with local suppliers. This not only helps the company reduce costs but also supports the local economy and boosts its reputation as a responsible corporate citizen. In India, McDonald's has partnered with local suppliers to source ingredients, including potatoes, bread, and condiments. This strategy has not only helped the company reduce costs but has also enabled it to offer fresher and more authentic products to its customers. By establishing strong relationships with local suppliers, McDonald's has been able to gain a competitive advantage and further differentiate itself from its competitors.

Franchising model

McDonald's has a franchising model, where local franchisees operate the restaurants. In India, this model has proven to be highly effective, as local franchisees have a deep understanding of the local market and are able to adapt the company's offerings to meet the specific needs of Indian consumers. This has helped the company expand rapidly and efficiently, and has also enabled it to maintain high quality standards and consistency across its restaurants in India. The franchising model has been a key factor in McDonald's success in India, as it has allowed the company to expand quickly while retaining control over its brand and operations.

Overcoming regulatory challenges

Expanding into a new market also involves overcoming regulatory challenges, and India is no exception. For example, the Indian government has strict regulations regarding the sourcing of ingredients, particularly with regards to meat products. This has required McDonald's to make significant investments in its supply chain to ensure it complies with these regulations and can continue to offer its menu offerings in India. In addition, there are also regulations related to land acquisition and restaurant operations, which have required McDonald's to navigate a complex regulatory environment in order to succeed in the market. Despite these challenges, McDonald's has been able to navigate the regulatory landscape and establish a strong presence in India through its commitment to compliance and its ability to adapt its operations to meet the specific requirements of the Indian market.

McDonald's success in India is a testament to the company's ability to adapt to new markets and overcome the challenges that come with expanding into new territories. By understanding the local culture and consumer preferences, partnering with local suppliers, using a franchising model, and navigating the regulatory landscape, McDonald's has been able to establish itself as a leading fast food chain in India. The company's success in India serves as a valuable lesson for other companies looking to expand into new markets and highlights the importance of market analysis, adaptation, and strategic partnerships in achieving success in a complex and dynamic global marketplace.

In conclusion, McDonald's expansion into India is a success story that demonstrates the company's ability to navigate the challenges of expanding into a new market and adapt its offerings to meet the specific needs of local consumers. Through its commitment to understanding the local market and its focus on quality, McDonald's has been able to establish itself as a leading brand in India and continues to grow in this dynamic and rapidly expanding market.

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McDonald’s Cultural Issues in India Research Paper

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Introduction

Mcdonald’s background and history, cultural issue, ethical responsibility issues, social responsibility issues.

This paper is about cross-cultural perspectives at Mcdonald’s. It looks at how businesses can be affected by cultural differences across the globe. The paper is based on the idea that people from different countries have different cultural orientations and preferences, which necessitate the need for multinational corporations to integrate cultural factors into their business strategy. The importance of doing so is that it makes organizational business to succeed due to the alignment of business strategy to individual cultures for various countries. Failure to do so may spell doom for multinational corporations because for a business to succeed, it does not only need to be friendly to the customers but also respect their cultural values. Some of the issues which are discussed include Mcdonald’s historical background, the cultural and ethical issues at the organization’s operations, and the social responsibility issues in different regions where the organization has operations.

The name of the organization is derived from one of its co-founders Mr. Maurice Mcdonald, who, together with his brother Richard started it in 1940 as a barbecue restaurant in California, United States. In the late 1940s, the duo used production line principles to change the organization from a barbecue restaurant to a hamburger stand. Eventually, they were joined by a prominent businessman Ray Kroc in 1955 who worked as their agent. Ray Kroc later bought the company and initiated its global expansion.

Currently, Mcdonald’s is one of the leading chains of restaurants dealing with hamburger fast foods across the globe with operations in over 100 countries and serving over 60 million customers on a daily basis. In its 35,000 outlets across the globe, it deals with various food items such as soft drinks, hamburgers, chicken, desserts, fruit salads, smoothies, milkshakes, fish, and breakfast items. The outlets are operated directly by the organization or by franchise agents.

India – McDonald’s where there’s no beef in the burgers

One of the countries where the organization has operations in India, which has a strong adherence to cultural beliefs and religious taboos and traditions. In India, one of the things which are highly influenced by culture is food. The reason is that Hindus do not eat beef since they consider cows as sacred, and for this reason, the majority of them are vegetarians. In the hotel industry, the problem with this taboo is that beef forms a key ingredient in making hamburgers the world over. However, the organization has managed to overcome this challenge by making hamburgers made of veggies instead of beef but retained the other qualities such as customer service, color scheme, and the junk appeal (Schumpeter, 2011).

Ethical perspectives at McDonald’s

Full disclosure of food ingredients.

One of the ethical perspectives at Mcdonald’s is in regard to the food ingredients. The organization has embraced the practice of full disclosure of ingredients in its food items. It does this by putting labels on all food items which it sells to customers. The idea is to enable the customers to be fully aware of what really is contained in the food which they eat. Such a practice is very critical because it not only enables the customers to have confidence in the organization but also gives the organization a competitive edge over its competitors. In some countries, some companies are known to give false information about their products while others do not give any details at all. Such a practice may expose consumers to dangerous effects of the products such as allergies or other ailments.

Dietary considerations

The other ethical perspective is dietary considerations. As mentioned earlier, people from different cultures have different preferences. In some cultures, people may prefer diets with low fat or sugar, while in others, they may prefer diets with sugar and fat as key to the ingredients. This concern has been considered by Mcdonald’s in its Indian outlets by ensuring that the majority of the food items are beef free (Libranza, 2014).

Comparison of Ethical Perspectives at McDonald’s across Cultures

The ethical perspectives in India are different from those in North America and Asia. While in India, the focus is on beef, the case is different in North America, where there are very few Hindus.

North America

In North America, the organization has focused on other ethical considerations such as remuneration of workers, proper working environment, and issues to do with fighting corruption.

In Asia, the major ethical perspective at Mcdonald’s is the provision of quality services with dignity. The aim of this perspective is to increase customer satisfaction. It relates directly to Mcdonald’s vision of being a world leader in fast foods through improved customer satisfaction. It relates to the organization’s overall objective in that improved customer satisfaction enables the organization to improve its financial base (Ruggiero, 2011).

Social perspectives at McDonald’s

One of the social responsibility issues of the organization is the initiation of Corporate Social Responsibility (CSR) programs at the community level. These programs include things like foundations for sponsoring the less fortunate it the society to attain education, the establishment of healthcare initiatives, and environmental conservation. The CSR initiatives relate to the organization’s mission of making people live better lives because a portion of the revenue collected is used to establish programs that enable the less fortunate in society to improve their living standards. It relates to the vision in that the corporate social responsibility initiatives are provided to all those who are marginalized, thus having a direct impact at the individual level. It relates to its overall strategy in that the provision of such CSR services and programs leads to increased customer satisfaction, which leads to an increase in customer base and more sales (Brannigan, 2005).

Comparison of Social Perspectives at McDonald’s across Cultures

In India, Mcdonald’s social perspectives are based on building rapport and trust with the local customers through the provision of products that respect their religion and traditions.

In North America, the social perspectives are on conservation of the environment through various programs.

In Asia, the social perspectives are on poverty alleviation, which is done through the initiation of various programs that help the poor get out of poverty (Trevino & Nelson, 2010).

Mcdonald’s is a global leader in hamburger fast foods with operations in various parts of the world. Its sensitivity to cultural beliefs and orientations has enabled it to succeed where many organizations have failed. The integration of countries’ cultures into its business strategy has enabled it to venture into new markets and realize good results. In India, for example, its sales hamburgers made of veggies instead of beef because a huge population of Indians does not eat beef. McDonald’s also engages itself in socially responsible programs such as poverty alleviation, economic empowerment, and environmental consecration, depending on the areas of priority in the different regions of the globe where it has operations.

Brannigan, M. C. (2005). Ethics across cultures: an introductory text with readings . London: McGraw-Hill.

Libranza, A.K. (2014). Analysis of the case of a McDonald’s in India . Web.

Ruggiero, V.R. (2011). Thinking critically about ethical issues . Dubuque: McGraw-Hill.

Schumpeter, (2011). Fast food and cultural sensitivity, Mcdonald’s ‘s the innovator . Web.

Trevino, L. K., & Nelson, K. A. (2010). Managing business ethics . New Jersey, NJ: John Wiley & Sons.

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"McDonald’s Cultural Issues in India." IvyPanda , 12 June 2020, ivypanda.com/essays/mcdonalds-cultural-issues-in-india/.

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IvyPanda . 2020. "McDonald’s Cultural Issues in India." June 12, 2020. https://ivypanda.com/essays/mcdonalds-cultural-issues-in-india/.

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Case Study: McDonald's Business Strategies in India
McDonald's The modest beginnings of McDonald's at Illinois in USA, turned out to be among the main brand names in the international scene. It has been synonymous to what is widely-accepted the fast-food concept. The company operates over thirty one thousand stores all over the world to date. It was one of the first to perfect the concept of fast service in the food industry in its early ...
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Case Study: McDonald’s Business Strategies in India

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Marketing and Brand Perception Challenges

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McDonald’s Cultural Issues in India Research Paper

Introduction

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