McDonalds India Business Analysis - Case Study Example

McDonald’s India Name Institution Course Date McDonald’s India McDonald’s is the world’s number one marketer of fast foods. The American company was founded in 1940 and is today a global brand operating in more than 120 nations across the globe, where it has established more than 30,000 stores serving at least 45 million people daily (Pangarkar & Subrahmanyan, 2011). This paper analyzes McDonald’s strategies beginning with SWOT analysis followed by competitor analysis. It will also analyze its internationalization strategies and conclude with analysis of the success of its internationalization strategy. SWOT Analysis Strengths Strong brand name and reputation: McDonalds has a very strong brand equity that it has built for many years. Currently, McDonalds is the world’s number one fast food company in terms of sales operating more than 30,000 stores in more than 120 countries (Pangarkar & Subrahmanyan, 2011). This implies that the restaurant’s brand is recognized almost in every part of the world and ranks among the top brands. Strong financial muscle: McDonalds has generated impressive financial performance, recording US$40.2 billion in sales. As such, the company has strong financial muscle that it can use to finance any project it needs to invest in easily (Pangarkar & Subrahmanyan, 2011). Large market share: McDonalds enjoys a large market share considering its wide global reach as the firm currently has presence in more than countries across the globe. Efficient supply chain: McDonald’s operates a very efficient supply chain that enables it obtains quality products from suppliers at relatively lower cost (Pangarkar & Subrahmanyan, 2011). Good management team: McDonald’s success is attributed to effective management team that has ensured that the restaurant adopts effective strategies to enable it stay ahead of the park. Technology innovation: McDonalds is effective in keeping up with the technological trends across the globe. In India, the company has installed internet access to its stores that enables customers to brows freely as they enjoy their meals and also allows them to order online Weaknesses Unhealthy foods: McDonalds serves meals that are associated with health problems as its foods are perceived to be unhealthy (Pangarkar & Subrahmanyan, 2011). Legal suits: McDonalds has been sued many times due to trademark issues as well as for allegation of deceptive advertising, which are not only costly to the company, but also destroys its public image. Threats Intense competition: The fast food industry is characterized by high competition as McDonalds has to compete not only with established brands, such as Wendy’s, Burger King, KFC and Dominion Pizza, but also with small start-up restaurants in different countries across the globe (Pangarkar & Subrahmanyan, 2011). Health issues: Consumers needs and preferences are changing with most consumers now want to eat healthier meals. As such, they avoid McDonald’s chains that still serve mainly junk foods such as burger and chicken fries as this is likely to cause decline in sales (Pangarkar & Subrahmanyan, 2011). Economic crisis: McDonald’s revenue and sales are affected by recession and economic downturns in different markets considering that it is a global brand. Foreign exchange risk: McDonald’s revenue and profits are affected by foreign exchange rate fluctuations because it generates revenue from different markets across the globe. Opportunities Expand in emerging markets: McDonalds has opportunity to expand further in emerging markets, as it has done in India to promote growth and performance Introduce healthier meals: As consumers become more health conscious, this provides opportunity form McDonalds to introduce healthier meals, such as fruit juices as part of its product offerings. Low cost menu: McDonalds has opportunity to introduce low-cost menu that enjoys high demand across the globe. Industry Analysis McDonalds operates in a fast food industry. The Indian fast food industry, where McDonalds operates can be analyzed using Porter’s Five Forces model. Porter’s Five Forces model is a strategic analysis tool used to understand the competitive landscape of an industry and the competitive position of a firm (Pangarkar & Subrahmanyan, 2011). Competitive Rivalry (High) The degree of competition in India’s fast food industry is high as McDonalds has many direct and indirect competitors, some of which are well established. Some of the restaurants that McDonalds has to compete with in India include Subway, Pizza Hut, Dominos Pizza and KFC (Pangarkar & Subrahmanyan, 2011). Threat of New Entrants (High) Threat of new entrants into the India’s fast food industry is high as new firms face weak barriers to entry considering that starting a fast food chain does not require a very large capital. Besides, the industry operates on the concept of convenience that makes it easy for new firms to enter (Pangarkar & Subrahmanyan, 2011). Bargaining Power of Suppliers (Low) McDonalds has a large number of suppliers for its products in India and this gives McDonalds a higher bargaining power over suppliers. These suppliers are diverse and come from different regions in India with burns sourced from northern India, cheese and chicken from western India and lettuce from southern part of the country. Some of its major suppliers are Dynamix, Cremica Industries and Mangesh Kumar (Pangarkar & Subrahmanyan, 2011). Bargaining power of Buyers (High) The India’s fast food market is flooded with a large number of fast food chains offering meals with less differentiation and this gives them a higher bargaining power. Besides, there is low buyer switching cost from one chain to another, thus giving them more power (Pangarkar & Subrahmanyan, 2011). Threat of Substitution (High) There are many substitute products that include fast food restaurants that provide similar and diversified products, family-owned restaurants and local Indian foods, as well as home cooked meals that customers can eat as alternative to McDonald’s (Pangarkar & Subrahmanyan, 2011). Profitability Potential of the Industry The industry is very promising in terms of profitability given the success that McDonalds has recorded since it first entered this market in 1993 (Pangarkar & Subrahmanyan, 2011). The market is huge considering that India is the world’s second most populous country with the market characterized by growing middle income earners, and declining unemployment spurred by stable economic growth in India. Besides, McDonalds can register good performance considering that it has managed to adapt to the Indian culture by introducing meals that meets their tastes and preferences, such as vegetables while avoiding beef (Pangarkar & Subrahmanyan, 2011). However, McDonalds must consider introducing healthier meals to ensure sustained success. International Strategy of the company Different firms adopt different strategies as they seek to expand their reach into foreign markets. However, according to this case, it emerges that McDonald’s adopted two different internationalization strategies as it sought to explore the Indian market. First, the company adopted joint venture partnership by partnering with Connaught Plaza Restaurant in 1995 on a 50:50 deal (Pangarkar & Subrahmanyan, 2011). Besides joint venture, McDonald’s also adopted foreign direct investment by forming a wholly-owned subsidiary in 1993. Conclusion It is apparent that McDonald’s internationalization strategy has been a huge success. Considering that India is a culturally rich country with the fast food industry highly regulated by the government, adopting a joint venture partnership was a huge success as it ensured made Indians to view McDonalds as one of their own for partnering with one of their own. Besides, adopting joint venture enabled it to minimize the legal challenges that foreign firms face when entering the Indian market. Reference Pangarkar, N., & Subrahmanyan, S. (2011). Beefing up the beefless Mac: McDonald’s expansion strategies in India. Case 8, 120-127. Read More