McDonald’s in India McDonald’s uses a multidomestic strategy in India. This can be seen from its use of local suppliers, its adaptive pricing strategies and the removal of the company’s representative product, the “Big Mac”, and replacing it with a range of new products specifically catered to the Indian culture and preferences. Unlike in other countries, a large proportion of Indians do not eat pork or beef, and many others are vegetarians. It is therefore practically impossible for McDonald’s to succeed with its international line of products such as the big Mac, which focuses on beef products.
Moreover, with each household spending more than 50% of income on food and beverages, and more than 70% of the population earning less than $2,000 annually, the company’s usual target segment of the middle-class households is unable to afford its products. Hence, it can be seen that McDonald’s needs a high level of responsiveness and adaptation to the Indian market. In addition, the company opted to enter the market as joint ventures with local managers, clearly showing no need of global integration, but rather, emphasis on local adaptability. Attractiveness of the Fast Food Industry in India
Factor Conditions in India Indian Culture Affecting the Demand of Specific Foods Inefficient Food Chain and Distribution Systems Chance Government Policies Porter’s Diamond Model Attractiveness of the Fast Food Industry in India Factor Conditions in India Indian Culture Affecting the Demand of Specific Foods Inefficient Food Chain and Distribution Systems Chance Government Policies Porter’s Diamond Model McDonald’s strategy is highly effective in India. McDonald’s success thus far in India is attributable to the factors as analysed in Porter’s Diamond Model.
An important factor for the success of McDonald’s was its reliable distribution channels for supplies from local suppliers. As the food chain and distribution channels in India were inefficient, and imports were taxed at a staggering 65%, it was important that McDonald’s obtain its raw materials from local suppliers, but at the same time ensure that the supplies were of good quality, and were delivered efficiently. This would be necessary to ensure that the company maintains a high standard of quality, while at the same time ensuring low costs of production.
Given the state of the agricultural industry and the high import taxes in the country, setting up a reliable distribution channel for McDonald’s creates a valuable resource that is rare, costly to imitate, and non-substitutable. It hence creates a sustainable competitive advantage for McDonald’s in India. Another important factor of success is the pricing adopted by McDonald’s. Unlike in other parts of the world, the consumers in India are highly price sensitive to food, since more than half of their income is spent on food.
Thus, it was important that McDonald’s sets acceptable prices for their products in India. This was not an easy task, as the company had to set a price that was affordable to the Indians, but at the same time, not undercut its profit margin. Hence, the company relied heavily on local management for the operations of the business. Not only did it enhance the company’s responsiveness to the local needs, it also allowed the company to understand the culture of the Indians better.
Fitting the company’s values into the culture of the country is especially crucial to the survival and success of McDonald’s in India, since the very nature of food products McDonald’s deals with may conflict with the cultural beliefs of Hindus, who make up the majority of Indian population. Besides seeking out opportunities, McDonald’s has also successfully dealt with the threats, especially those of the environmentalist groups. As there were many vocal environmental and animal activists in India, they posed a substantial threat to the company’s business.
Further, these groups also campaigned that fast-food joints were anti-poor and cater only to the rich segment. This was especially threatening to the company, since the majority of Indians were not well-to-do. In response, McDonald’s products were aptly priced to be affordable to the general public. In addition, they introduced healthier products (such as the toasted McCurry Pan), an also actively participates in many community-involvement programmes, which are largely directed towards children. Since India is in the stage of population growth, the proportion of children is especially high.
This strategy hence allows McDonald’s to increase its popularity amongst households with children. Moreover, it also fits well with McDonald’s culture of focusing on children. While McDonald’s strategy in India has been effective thus far, there are challenges it continues to face. Currently, McDonald’s is situated only in a few metropolitan cities, where the crowds are more familiar with American products, and are willing to try these products. However, with the development of India, McDonald’s has to expand to other cities to reach out to the rest of the nation.
With the highly regional culture of the country, it has to continuously develop its products which are able to cater to the unique preferences of the consumers. This is important to the company’s continued success in the country. Besides, the company also has to ensure that it continues to garner political support. As the country has many activists groups and extremist religious groups, it is important that McDonald’s has the support of the government in order to ensure that the operations are able to continue in times of chaos.