McDonald's establishment strategy in India

Abstract

The establishment of Mc Donald’s in India is traced back in the mid 1990’s, more precisely in October 1996 when the well-known American company opened the doors of its first outlet in Vasant Vihar, a colony in India’s capital, New Delhi. Despite the growth prospects of the Indian market at that time, the Indian move of Mc Donald’s was far from being obvious in the eyes of many analysts. Indeed, if population was growing at a fast pace and a part of it was becoming richer with the economic development of the country, the fast-food companies were about to face an hostile environment where political hurdles and local culture could easy impede any establishment in the promising Indian market. Moreover, the popular products that upheld and also symbolized the success of Mc Donald’s worldwide, like the traditional Big Mac, were useless to lure the Indian customers who were clinged to their traditional habits. Therefore, for the first time of the company’s history, which started in 1940, the firm was going to contend with a market where its traditional business model was entirely questioned. What would a traditional vegetarian consumer think about a Big Mac which is made of beef? How will the Mc Donald’s brand, a symbol of the American way of life, be considered by the Indian society which is hostile to any form of imperialism? All these questions raised doubts about the ability of Mc Donald’s to successfully implement its model in India. However, the company decided to step into the country in 1996, several years after the move of several key competitors, such as KFC or Pizza Hut. Aware of the challenges ahead, Mc Donald’s teams took time to cautiously devise a strategy to appeal to Indian customers. But the rationale behind this strategy was clear: Mc Donald’s needed to adapt its entire offer to the specific aspects of the market. All its products were to be adapted or removed from its menu whereas new products were needed to attract consumers who were still reluctant to any kind of world food. One word can summarize the strategy of the firm: adaptation. Today, Mc Donald’s operate more than 275 restaurants across 45 cities in India. The American firm is present in the main cities, from the North to the South. The consumer market is growing at an strong rate while the purchase power of the middle-class Indian households is dramatically increasing. These figures raise several questions regarding Mc Donald’s development in India: how did an American firm, so dependent on its traditional products, adapt itself to invest a so hostile market? Is this Indian move a total success for Ronald’s teams? Will Mc Donald’s be able to continue its expansion at the same pace? The answers to these questions are the purpose of our analysis which will be divided in 3 parts. First, we will highlight the key factors which explain the daring move of Mc Donald’s in India in the mid 1990’s. Then, we will dig into the firm’s strategy to adapt itself to a unique market which was far from being ready to welcome Ronald’s product. And finally, we will dwell on the issues ahead for the further expansion of Mc Donald’s activities in India