McDonald’s in India, Critical Thinking Analysis Do you think McDonald’s has done well in addressing the key macro- environmental factors in India, and why? I will start off by saying; Yes, I think McDonald’s did really well in addressing the key macro-environmental factors in India. To give some more debt to this answer, I found it convenient to use the PESTEL analysis as a tool to identify the key macro-environmental factors that were relevant for McDonalds when they entered India, and then shortly comment on each of them what McDonalds did that was so good. Political/Legal
Until the early 1990s, India’s political parties were critical of foreign companies operating in India. After that the market opened more up, but still the political climate seems to be in some ways critical of foreign MNC’s. To deal with these problems McDonald’s choose to partner up with local companies and to create joint-ventures.
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Their local business partners knew which steps that needed to be taken to create political goodwill and how make the introduction of McDonalds go as smoothly as possible. When McDonald’s entered India, it was crucial for them to be aware of the local culture, and to not appear as bold Americans.
India was known for their sensitivity to cultural imperialism, and they feared that the western culture would come in and dominate the traditional Indian values, traditions and so on. McDonald’s was careful and they listened closely to the local demands and did their best to adjust to the target market’s needs. I am aware that this is closely tied to the socio-economic factor, but eventually this also has a huge affect on the political environment. McDonald’s seems to have succeeded in with the way they monitored the market and the way they customized their concept to fit the Indian market.
If you compare the little resistance that McDonald’s seems to face from the government, to India’s ranking on the Ease of Doing Business-index, it looks like McDonald’s did good in issuing these issues. Economic Since India started the liberalization of their economy in 1990s, the economy has gone one way, and that is up. The GDP has been steadily increasing, and is by mange experts regarded as one of the most promising future economies. The trend in India is that the economic growth mainly is situated to the largest cities, and there has been a large growth in what is described as the upper class.
It is also important to look at the fact that the middle class is constantly growing, and that more and more Indians gets a higher income. McDonald’s did a really smart thing when they waited a couple of years before they went in to India, because when they came in, the market was really growing. The fact that the middle class is constantly growing is of high importance to McDonald’s, since this is the group that makes up for the majority of the sales. So when more and more people are able to afford McDonald’s, the market will grow and the sales will go up.
Even if the economy of the middle glass is getting better, a lot of people still perceives McDonald’s as expensive. To deal with that fact, McDonald’s has cut the prices of many of their items, and by that appeal to an even broader market. It is still a bit early to say if McDonald’s has succeeded with this strategy, but sales are going up. Socio-cultural Personally, I feel that in this case, this is the most important of the key macro- environmental factors. As mentioned above, there has been a lot of fear in India that the western companies will come to India with their western culture and dominate the existing culture.
In the urban areas, where McDonalds decided to go into first, a large part of the population is exposed to western culture through the media and also the internet. Therefore they accept western values and culture more than they do in other parts of India. It was therefore a vice decision to enter these markets first. What McDonald’s has done so well in India is that they have focused a lot on adapting to the customs, culture, religions and traditions that exists in India, and instead of just implanting their “own” western culture.
They have spent time and money on identifying the needs of the Indian customers, and they have adjusted their menus, their restaurants and the way they deliver the food to the needs of the customers. They have shown cultural sensitivity in a great way, and this has hopefully made more people welcoming towards western companies, food and culture, and with that pave the way for further expansion for McDonald’s in India. Technological One of McDonald’s most critical strategies was how to set up a well-established supply chain in India. They had to improve the standards of storage, distribution and transport.
Since the infrastructure for storage and transportation is pretty poor in India, McDonalds decided to open their outlets only within 500-km radius of their main distribution centers. To deal with the transportation problems they decided to help a local company(Radhakrishna Foodland), and together they developed software to keep track on supplies and a trucking fleet that helped them secure good quality of the food and also to keep the transportations costs low. Due to macro environmental factors such as high import duties and foreign exchange fluctuations, McDonalds decided to source its raw materials from the local suppliers..
To deal with the fact that the quality of the agricultural products was low in the start of the 1990’s, McDonalds started working together with local Indian companies 6 years before they entered, and they also transferred their state-of-the-art food processing technology to India, and with these steps McDonalds managed to develop the quality they demand for their products. This meticulous planning of the supply chain system has been a key success factor for McDonalds in India.
It has led to minimized costs, optimized quality control and high customer satisfaction. The improved transportation and food processing technology has also increased the agricultural productivity in India, which has led to goodwill from the government. Environmental When McDonalds entered India they were aware of the fact that there in India is a vocal group of environmental and animal activist that oppose to the entry of fast-food chains. To counter with these negative campaigns, McDonalds decided to institute a fund that supports green movements in Delhi.
They give financial contributions to different environmental campaigns, they sponsor community-related activities and they try to promote environmental consciousness. With these steps, McDonalds has managed to deal with some of the problems that could have aroused, and instead they have used this to create a stronger brand name and also generated more official support for their expansion strategies and the way they do their business.