Answer Happy

In 1954, a milkshake mixer salesman named Ray Kroc traveled toSanBernardino, California, to see why one restaurant had ordered somany of his Maltimivers. The McDonald brothers had invented a newconcept in the restaurant business and Kroc wanted to see forhimself why the business was so popular. Dic and MacMcDonald had pioneered fast food based on high volume, low prices,limited menu, and quick service. The restaurant was a success, andRay Kroc wanted it. He negotiated an agreement with the McDonaldbrothers in which he would become the exclusive franchiserof the McDonald name! In 1955, the first McDonald's franchiseopened in Des Plaines, Illinois. The McDonald's empire would bebased on four core values providing customers with quality,service, cleanliness, and value (QSCV). Kroc believed thatconsistency in these core values would allow McDonald's to build astrong brand image throughout the United States. He was right. Theconcept was a success, and by 1963 McDonald's was selling 1million hamburgers a day. The first international McDonald'sopened in Canada in 1967. McDonald's continued its internationalexpansion into Japan, Germany, Australia, France, and Englandin the 1970s. Additional outlets were established in LatinAmerica, the Middle East, Central and Eastern Europe, Russia, andChina. The motive for McDonald's international expansion was therealization that most potential sales existed outside the UnitedStates. As Kroc had said in 1954, when he witnessed the McDonaldbrothers' original restaurant concept, "This idea can sellanywhere." Based on the need for additional sales growth and thebelief that the concept could be exported, McDonald's embarked onan aggressive international expansion effort beginning in the1970s. Today, McDonald's has restaurants in 119 countries andderives over 60 percent of its profits from sales overseas. Onaverage, the company opens a new restaurant somewhere in the worldevery five hours, and McDonald's can be found on every continent,except Antarctica. Prior to 1996, McDonald's did not have arestaurant anywhere on the Indian subcontinent. With apopulation of over 1 billion, India is viewed by many as a marketwith an enormous potential. India's population is second only tothat of China, and, with differing birth rates, India will becomethe most populated country in the world by 2020, according tosome estimates. India represented a big challenge toMcDonald's because most Indians could not eat the main menuitem: the beef hamburger. Over 80 percent of the Indian populationis Hindu and this religion prohibirs the consumption of cowproducts. Also, approximately 40 percent of Indians are strictvegetarians and cat no meat of any kind. A significant percentageof the Indian population is Muslim, which also prohibits theconsumption of pork products. India is a federal republic, whichgained its independence from Great Britain in 1947. After manyyears of British rule, Mahatma Gandhi led a mass movement forindependence. Since that time, India has been as its constitutionstares, a *sovereign, socialist, secular, democratic republic." Theeconomic self-reliance or "swadeshi" begun under Gandhi influencedpublic policy in India for over 40 years. India finally began toliberalize economic policy after experiencing a severe foreigncurrency crisis. In 1991, major changes occurred that made foreigninvestment easier, including reduced tatiffs, removal ofnon-tariff barriers to trade, and loosened foreign investmentrestrictions and currency controls. India still remains a poorcountry and a difficult market for Western companies. Percapita GDP is $1,498, and many Indians live on less than a dollar aday. Yet, the economy with a high growth rate in recent years hasraised many out of poverty and produced widespread income gains.The government recognizes eighteen languages, with Hindi being themost widely spoken. English is also spoken, especially inurban areas and among the better-educated component of thepopulation. Violent religious clashes occur between Hindus andChristians and between Hindus and Muslims, and there is acurrent movement to establish an all-Hindu India. The religious andsocial class tolerances advocated by Gandhi do not seem to be aswell accepted by many in India today. India is a country divided bylanguages, religion, and caste. In 1996, McDonald's opened itsfirst restaurant in India. The first McDonald's in India waslocated in Delhi and was the only McDonald's outlet worldwidenot to offer beef on its menu. Due to dietary restrictions imposedby religion, McDonald's had to be creative in its productofferings. Without the possibility of serving beef or pork,McDonald's offered the lamb patty and a veggie burger. The Big Macwas named the Maharaja Mac and substituted ground lamb for beef.After opening its second restaurant in India, this one in Mumbai,McDonald's had invested $14 million, yet the company was notcompletely sure of the potential of the Indianmarket. Although business was brisk at both locations, someconcerns were raised. Some consumers complained about the blandtaste of the food Accustomed to the spicy traditional Indian food,McDonald's meals seemed too plain for some consumers. There wasalso a concern about the political stability of the countryand long-term acceptance of McDonald's in India. The Indiangovernment did not support the entry of McDonald's into the countryand some Indians protested the arrival of the Americanmultinational. Previous American franchises have been the target ofvandalism in India in the past. KFC, Dominos Pizza, and Pizza Hutall have several locations in India, and some of the restaurantshave experienced difficulties with political mobs. McDonald'sis perhaps in an even more vulnerable position because its primaryproduct worldwide (beef) is viewed by many Hindus as notappropriate for consumption. As one protestor remarked *They arethe chief killers of the cow.* Other protestors so McDonald'sas a symbol of the exploitation of the world's poor by richAmerican multinationals. In 2005 McDonald's settled a $10 millionlawsuit brought by vegetarians in the United States who had chargedMcDonald's with misleading advertising. McDonald's had beenusing a beef flavoring for its French fries without tellingconsumers. The news of this culinary process caused protest inIndia and some store vandalism, however, McDonald's had beencareful not to use the beef flavoring in India. McDonald's of Indiais a 50/50 partnership between the McDonald's Corp. and two Indianbusinessmen, who have divided the market into North and East, andWest and South markets of India. McDonald's faces stiff competitionfrom Yum! Brands Inc., which operates KFC, Pizza Hut, and TacoBell. Yum has the advantage of having its product offeringsmore consistent with the requirements of a Hindi diet. Atpresent there more than 250 McDonald's restaurants in India andthere is a plan to double that number by 2020. McDonald's of Indiacontinues to experiment with different product offering to satisfylocal tastes and preferences and has developed a McDonald'sdelivery phone app to bring meals to consumers.Faced with thedifficulties of product acceptance, low purchasing power amongconsumers, and the ever-present potential of political conflict,McDonald's, nevertheless, hopes to grow this emerging market inthe coming decades. With a large and growing population, andincreasing incomes, McDonald's feels that Indians will embracethe product offerings and make India a very good growth market forthe company.
What lessons can be learned by other MNCs fromMcDonald's experience in India?