McDonalds Corporation in India

McDonalds Corporation in IndiaOrganizationMcDonalds is the solid grounds leading spendthrift f argon kitchen range with 31,000 topical anesthetic restaurants in 118 different countries and collectively serving more(prenominal) than 58 million tidy sum (www.ab let outmcdonalds.com). Due to globularization and inter contentization, the tidy sum established joint ventures, and riper franchises, which en qualifiedd them to spread into other(a) countries, worry India. This turned McDonalds into a multi-billion dollar bill enterprise (McDonalds Annual Report 2008). Founded in 1937 by brothers Richard and Maurice McDonald, the fast f be chain began as a drive-in restaurant in calcium (Vignali 2001). In 1954, Ray Croc saw an opportunity in the fast intellectual nourishment market and initiated a deal with the brothers, giving him rights to franchise McDonalds in the States (Vignali 2001). By 1965, there were over 700 McDonalds restaurants in the field and in 1967, the corp oration went introductionwide by outset restaurants in Canada and Puerto Rico (www.aboutmcdonalds.com). Since hence, an average of 4.2 unsanded McDonalds restaurants is opened daily or so the world ( hillock 2009), one of which include Indias for the jump time McDonalds in Mumbai in 1996 (www.mcdonaldsindia.com).The American fast forage chain is the digest of this plow beca workout of its increasing international heading in the world. The literature surveil covers an overview of the strategies and models that ordain help better belowstand McDonalds move into the Indian market. The discussion and analysis section will focus on McDonalds in f wasteure and the ch eachenges and competition the corporation faced in this in the buff remote market. Lastly, the report will conclude with recommendations on how and what McDonalds can do to better their bit in India. Literature Review world-wideisation refers to the growing interdependent relationships among community fr om different cultures and nations as physical and psychological walls collapse, barriers to the movement of divvy up, capital and people ar blurred and modern technology is integrated (Daniels et. al. 2009 Hill 2009). This indicates the both main factors that drive globalization are the decline in barriers to the set down flow of goods, services and capital, and the change in technology (Daniels et. al. 2009). outside(a)ization involves customizing barter strategies depending on ethnic, regional and national differences (Vignali 2001). Since the 20th century, more corporations catch constrain global to create nourish for their organizations and to achieve warring advantage. This was followed by the modernisement of multinational enterprises or corporations (Daniels et. al. 2009). According to Vignali (2001), globalization involves marketing standardized intersections the akin way everywhere, thus viewing the world as a single entity (Vignali 2001). However, the reali ty is that nations, cultures and people vary around the world. Corporations need more than sightly globalization to succeed in the international market. According to Taylor (see Vignali 2001), companies should intend global, act local (Vignali 2001, p.98) by combining internationalization and globalization elements to create a competitive advantage.Entry ModesDetermining the appropriate entry mode for a corporation is a complex task. Hill, Hwang and Kim (1990) verbalize that different entry modes make water different levels of assert over inappropriate trading operations, in terms of managing operable and strategic decision-making. Some of the common entry modes apply by global corporations are franchising and joint ventures (Hill 2009).Franchising is when a company, or franchisor, sells intangible property, like a trademark, to the franchisee with the stipulation that the franchisee abides the by the rules and conditions specified in the franchising contract (Hill 2009). The rules as to how franchisees maneuver a restaurant extends to control over the menu, cooking methods, staffing policies, and design and location. This is a common outline approached by rough fast food chains. By franchising to local people, the delivery and interpretation of something foreign is translated by the local people, in terms of both product and service (Vignali 2001), and the costs of tally the telephone line is cheaper. However, franchising may inhibit a corporation taking profits out of one country to support competitive attacks in other country (Hill 2009). Also, the feature of the brand in the foreign country may not be the same or up to par as the fibre of the brand of products in the corporations native country, which is ultimately bad for business (Hill 2009). phrase venture is sharing ownership surrounded by 2 or more companies and the percentage of ownership varies from 50% to more or less (Daniels et. al. 2009). It has identical advantages as fran chising only when can have more riddles, such as lack of control of technology (Hill 2009).When choosing the market it is important to consider long-term economic benefits including the market size, the present richesiness of consumers in the market, and the future wealth of the consumers, which depends on the economic egression rate (Hill 2009). Hill (2009) argues the product hold dear in the foreign market is another(prenominal) deciding factor. This depends on if the product is suitable to the market and the local competition.As they turn global, organizations are change in terms of their strategies, operations, management, marketing, and human and material resources and services (Daniels et. al. 2009). This is because foreign markets have different physical, social and competitive factors from the domestic market, and this affects the objectives and the strategy of the corporation (Daniels et. al. 2009).IR ModelCompanies that operate internationally face two forces press ures for global desegregation and pressures for local responsiveness (Daniels et. al. 2009). In their research paper, Doz and Prahalad (1984) explain economic, technological and competitive conditions push global integration, whereas motley in client needs, distri furtherion channels, media and trade barriers between countries push responsiveness.Research shows that the higher the pressure for global integration, the great the need to maximize efficiency through standardization (Daniels et. al 2009). Customers absorb standardized products and this reduces costs for the corporation (Daniels et. al 2009). But, international corporations are under pressure to reconcile their operations to the local market conditions and local guest demands, as well as adhere to the policies mandated by host-country governments, which varies around the world (Daniels et. al. 2009). The integration-responsiveness model, shown in figure 1, was initially developed by Prahalad and Doz in 1987 and thu s developed further by Bartlett and Ghoshal in 1989. It shows the interaction between global integration and local responsiveness (Daniels et. al. 2009). The IR model presents 4 strategies to guide how international corporations will enter and compete in the foreign market international strategy, multidomestic strategy, global strategy and transnational strategy. International strategy is adopted by corporations when they want to influence their core out competencies by expanding into foreign markets. Secondly, a multidomestic corporation is locally responsive (Daniels et. al. 2009, p.475) as it allows each of its operations in foreign countries to act independently. The subsidiaries have the freedom to do to the preferences of their local customers when designing, making and marketing products (Daniels et. al. 2009). A global strategy maximizes integration and it pushes a company to make a standardized product for a global market, such as shampoo. Lastly, transnational strategy differentiates capabilities and contri andions from country to country allowing companies to let out from them. It endorses an integrated framework of technology, monetary resources, creative ideas, and people (Daniels et. al. 2009).Culture Hofstede, a key researcher in the subject, defines culture as the collective programming of the mind which distinguishes the members of one group or category of people from another (see Hill 2009, p.89). Banerjee (2008) amounts it is a set of orders, ideas, artefacts, and other meaningful symbols that shape our attitudes and actions. Globalization has given up rise to a new concept of no-border (Banerjee 2008, p.368) world. Cultures merge, change and develop as people move around the world this has amplificationd quickly repayable to improved technology, the birth of the internet and expanding networks of interpersonal and mass communication guess (Craig and Douglas 2006).As mentioned earlier in this report, corporations become inte rnational to create value and gain competitive advantage. One means of doing this is by promoting ethnic diversity (Daniels et. al. 2009) as people from diverse backgrounds and experiences are brought together. When divergent cultures come in contact, heathenish collision takes place. In adjacent to this theory of cultural collision, Craig, Douglas and Bennett (2009) say Americanization, a type of internationalization, which refers to the spread of American culture through US corporations.Establishing a global platform allows individuals and organizations to interact with each other, regardless of time, plaza and language. Globalization leads to plenty of opportunities, but it has withal gives rise to challenges. Mayo (see Rawwas 2000) instal that first-time exporters often fail as they try to expand internationally is because they were unavailing to understand cultural differences and foreign business practices. Rawwas (2000) concludes that an enhanced sensitivity to cultura l variables is needed (p.203) for understanding the needs of international customers and making the necessary decisions to tally them.Discussion and Analysis McDonalds has been operating in India since 1996 and has a total of clx restaurants nationwide (www.mcdonaldsindia.com). Its strategy is to achieve best value by offering the best quality, while prices are kept reasonable (www.mcdonaldsindia.com). McDonalds success is attributed to its cargo to deliver quality, service, cleanliness and value to customers, increasing the number of outlets to improve convenience, and finally, its investment in supplier development, training and people (www.mcdonaldsindia.com).Entry ModesThe maturement of the emerging Indian market is attributed to the resurgence in manufacturing sector, growth in service sector, and large foreign investments (Sharma and Srinivasan 2008), as well as technological changes, GDP growth, and increase in literacy and income levels (Dana and Vignali 1998). Sharma a nd Srinivasan (2008) list Indias infrastructure, its economic development, market size, present and future wealth of consumers, and consumer culture as the main attraction for foreign investors.Hill (2009) and other researchers specify Indias large and relatively prosperous middle class of around 100 million (Harding 2000) was a main attraction for McDonalds. In addition, Sharma and Srinivasan (2008) state the expectation of India to be one of the top three economies in the world by 2050, along with China and USA too presented ample opportunities for the American corporation. It was a major risk on McDonalds part as India is the wholly country where the fast food giant does not include rush in its product, McDonalds primary bleak material (Harding 2000).In conjunction with Sharma and Srinivasan, Morrison and Beck (2000) add that the costs and risks associated with doing business in India are lower because it is an economically innovational and politically stable democratic (Hil l 2009, p.489) nation and it is cheaper for McDonalds to use local raw materials (Morrison and Beck 2000). Prior to its entry into India, the corporation was involved with local suppliers to ensure they were able to generate the right quality and quantity of raw materials required for production. These included potato farms in Gujarat, Trikaya Agriculture for lettuce, Dyanmix Dairy for cheese, and Vista Processed Foods for jaundiced and vegetables (www.mcdonaldsindia.com). McDonalds also developed a cold chain network, which keeps raw materials reinvigorated as they are moved from the farms to the restaurants at the lowest possible costs. This rum network benefits the local farmers, while at the same time, gives customers high quality food products that are fresh and of great value (www.mcdonaldsindia.com).Goyal and Singh (2007) insist that although traditionally, Indians prefer home-cooked meals, there has been a shift in the food consumption patterns due to westernization. Indi ans were more receptive to international food and eating out at restaurants (Goyal and Singh 2007). According to worldwatch.org (see Goyal and Singh 2007, p.184), Indias fast food industry is growing by 40% each form.Prior to the entry of international fast food outlets, Goyal and Singh (2007) break down that Nirulas was a best-selling(predicate) domestic fast food provider. The British Wimpys was the first international fast food chain to enter the Indian market in 1984 and were an instant success. Except for Wimpys and later KFC, India was not home to umpteen fast food outlets in the mid-1990s, and the McDonalds Corporation felt they could give something peculiar(a) to the Indian customers (Goyal and Singh 2007).McDonalds entry into India was initially done through joint-venture companies M.D. Hardcastle Restaurants Pvt. Ltd. tips up the restaurants in west and south India, while those in the north and east are managed by Connaught Plaza Restaurant Pvt. Ltd. (www.mcdonaldsin dia.com). However, this is unlike Vignali (2001) and Hill (2009) who indicate that McDonalds growth and international success is attributed to using the franchising strategy (Hill 2009, p.498). McDonalds allows local firms in India to use its brand name as long as they stick to the franchising contract. They also organize the supply chain for its franchisees and provide management training and financial assistance (Hill 2009).As mentioned in the literature review, maintaining the expected quality of McDonalds products throughout its outlets in India is a challenge (Hill 2009). One way in which they detainment this is by establishing a master franchisee (Hill 2009, p.498). This is where the joint venture McDonalds has established with the two local firms is crucial. The managers of the firms, who have been trained at McDonalds Hamburger University in America, head up the two master franchisee and oversee the operations in all McDonalds outlets in India (www.mcdonaldsindia.com Hill 2 009). It can be argued that the American fast food giant initially entered the Indian market through joint-ventures, but then later spread all over the country through franchises.Hill (2009) continues that, through joint ventures and franchising, McDonalds benefits from the local partners knowledge of the countrys competitive conditions, culture, and language, and the corporation is also relieved of the costs and risks of opening in the foreign market on their own instead, the franchisee assumes all the responsibilities. By using this strategy, McDonalds was able to expand rapidly at a relatively low cost and risk (Hill 2009).IR ModelMcDonalds adopted the international strategy through franchising to push their core competencies in the Indian market and to customize their products and services to the local customer demands (Hill 2009). This way the corporation relies on local subsidiaries in India to stick to the regulations of running McDonalds and ensure the standardizing of its p roducts and services (Daniels et. al. 2009). However, the Indian market is culturally diverse, so despatch standardization within an international scale is impossible. Dana and Vignali (1998) argue that standardization is cheaper, but success is often a function of being able to adapt to an environment (p.50). McDonalds standardizes as much as possible to reduce costs, but they are aware of cultural differences and have adopted the concept of gauge global, act local (Vignali 2001, p.99).According to Hill (2009), international strategy provides the subsidiaries with some freedom, but the primary control resides with managers at the headquarters in America. Multidomestic strategy, on the other hand, allows McDonalds in India to act independently from its counterparts in America. The Indian subsidiaries are granted the authority to design, make and market new products that directly respond to the local customers preferences (Hill 2009).McDonalds does not use beef because the cow is w orshipped by the local Hindu population. In fact, possession of beef could result in five years jail time (Dana and Vignali 1998). Thus, the corporation completely removed beef from all its products, as well as pork for the Muslims (Harding 2001). kinda of the ever-popular double Macs found in the west, McDonalds in India serves Maharaja Macs made from mutton, dreary vegetarian rice patties (Morrison and Beck 2000), chicken burgers, vegetarian McAloo Tikki burgers, containing potatoes, and vegetarian pizza puffs all designed to draw in the Indian middle-class (Harding 2001 Vignali 2001).Customers in India have different preferences due to cultural and phantasmal differences, so McDonalds is required to modify and adapt their products and services as according to the local demand. Therefore, as indicated in figure 2, McDonalds strategy is positioned between the international and multidomestic quadrant.CultureCraig, Douglas and Bennett (2009) state in their article that as that the opening on McDonalds in India is a reflection of the American culture spreading. The Indian public have mixed feelings about the companys presence in the country. Usually, the junior generation, particularly, the college-going crowd and high school students from the middle-class enjoy the new taste. However, many of them argue that McDonalds food is badexpensiveun-Indian (Harding 2001).Food ingredients are not the only things McDonalds had to modify. They lettered the hard way to be aware of the religious belief and value of Hindus, Jains, Muslims and Christians in the country and adapt to each. Dana and Vignali (1998) recount an incident in the late 1990s that arose when McDonalds printed two million bags illustrating the flags of 24 competitors of a football championship. The problem was that the Saudi Arabias flag contained the religious words There is no theology but Allah, and Mohammad is his prophet (Dana and Vignali 1998, p.50). This angered the large Hindu population in the country and caused a scandal, affecting McDonalds reputation.CompetitionMcDonalds key competitor is KFC, another American fast food giant. KFC entered the Indian market a year before McDonalds and there were problems from the start. The corporation would fatten its chicken on maize, but this was also a source of nutrition for the poor in India. They were get less and less maize and could not even afford to eat at KFC (Dana and Vignali 1998). The Karnataka Farmers Association went on riots to demonstrate their protest and anger at the corporation, and it eventually culminated with KFC losing their permit in the southern state (Dana and Vignali 1998). KFC restaurants in India are limited and many of them have faced issues, such as unhygienic conditions (Dana and Vignali 1998, p.51). Another competitor in India for McDonalds is the British fast food chain, Wimpys (Dana 1999). They are the only international fast food conglomerate who has been in India the longest. Their growt h has been slowed down over the years due to the number of international fast food chains entering India, but they frequently expand and create their menus with Indian dishes to attract Indian customers (Goyal and Singh 2007).Although McDonalds has done comparatively better than KFC in India, the former faced plenty of challenges too. In the following section, recommendations are given on how McDonalds can improve their performance in subcontinent.Recommendations and Conclusion early 2000, McDonalds faced a lot of problems and the local population were dissatisfied with the corporations presence in the country. The problems stemmed from the corporations lack of understanding about cultural and religious beliefs in India. This shows a sign of lack of faith and lack of trust, particularly after rumours of beef fat in cooking oil used by the French McDonalds (Harding 2001) set of angry protests in India. Delhis managing director for McDonalds insists the outlets in India do not use b eef extracts, but since the McDonalds empire was construct on beef products, some Indians find it hard to believe that the local outlets do not use beef extracts (Harding 2001). It is a delicate moorage and a hard problem to solve when religion and cultural beliefs are involved. The best thing McDonalds can do to keep business silklike in India is by building up consumer trust in the Indian market. By establishing a strategic alliance between domestic competitors, like Nirulas, customers might be influenced into eating at McDonalds (Hill 2009). This collaboration would encourage McDonalds to develop more Indian-friendly products, like curries, that fit the tastes of the local demand, and it might present the American corporation in a more favourable light.McDonalds is a popular fast food chain found all over the world. immersion into the Indian market was a brave move and it set new challenges for the corporation due to cultural, religious and ethical differences in the country. McDonalds are even-tempered facing problems, but for the most part they have managed to attract a part of the Indian population, fascinated by this western culture. In conclusion, contempt the blurring of the physical boundaries between India and America, cultural factors still affect Indian customers buy habits (Banerjee 2008) and McDonalds need to focus on gaining the trust of their local customers, or they will be unsuccessful like their fellow-American competitors, KFC.ReferencesBANERJEE, Saikat, 2008. 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