McDonald’s Corporation

In E merging Mar ket

By
Md. Rakibul Hasan Rony

BBA in Marketing JAGANNATH

UNIVERSITY
 McDonald’s Corporation in Emerging Markets

1.0 Case Summary

The case focuses on the US- based fast food chain McDonald's entry and expansion
strategies in the Chinese market and Russian market. McDonald's entered China and
Russia in 1990. Since then McDonald's in China and Russia have been expanding
steadily by providing outstanding quality, service, and value to its customers. It
entered into Russia at a time when the country was still struggling to gain political
and economic stability after reforms had been introduced. McDonald's strategic plan
in both countries was to focus on core menu extensions, convenience and value. The
case details the operational strategies of McDonald's in China and Russia. The case
also discusses the different challenges faced by McDonald's in both Countries. Such
as- problems of obtaining building materials to build the restaurant as sand or gravel,
short supply of sufficient sugar and flour and another problem was some supplies
were not simply produced or consumed in the Soviet Union like iceberg lettuce,
pickling cucumbers, the Russet Burbank potatoes etc. in Russia. And on the other
lacking of quality supplies and distribution difficulties are problems in China. In
January 1990, it was almost impossible to accommodate the crowd, when the
restaurant’s door opened for the first time in Moscow though it was the largest
McDonald’s in the world. At the first day, an estimated 30000 customers were served
though the price of McDonald’s products was so high, the crowds continued. China’s
government wanted establish its fast food market and felt that western companies like
McDonald’s could take the risks in proving its success. In 1990, the entry of
McDonald’s into china resembled its experience in Russia. In china McDonald’s
moved more smoothly which was not possible in Russia. Macdonald’s opened 96
restaurants in China, totaling 430 restaurants altogether in the first six month of 2001.
Macdonald’s success in China has continued into the twenty first century. McDonald's
did a tremendous success in Russia as well as China.
2.0 Discussion

McDonald's Corporation is one of the oldest chains of quick service restaurants in the
world and the largest, serving nearly 47 million customers daily. It was started in the
late 1930s by two brothers Richard and Maurice McDonald in California, the US.
Within a few years, the chain had become quite popular and it started to grow in
numbers. The founders started to franchise out the stores to other partners at a
premium price. In 1967, it started its international expansion for the first time by
entering Canada and subsequently ramped up its presence in other international
markets. A McDonald's restaurant is operated by a franchisee, an affiliate, or the
corporation itself. The corporation's revenues come from the rent, royalties and fees
paid by the franchisees, as well as sales in company-operated restaurants. McDonald's
revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9%
growth in operating income to $3.9 billion (Wikipedia, 2010). McDonald's sells
hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft
drinks, milkshakes, desserts, salads, wraps and fruit etc.

3.0 Facing problem

Operating Business in Russia and China, McDonald’s faced several problems. Here
our discussion regarding the problems which faced by McDonald’s in Russia and
China. In Russia, they got negative response from Moscow City Council like Sorry,
“You are not in my five-year plan”. Others problems are- To build the restaurant,
attempting to obtain such material as sand or gravel, short supply of sufficient sugar
and flower, strict allocation regulation of soviet dictated that no opportunity to
produce products for McDonald’s leaving the existence soviet companies and another
problem was some supplies simply were not produced or consumed in the Soviet
Union like iceberg lettuce, pickling, cucumbers, and the russet Burbank potatoes.
Macdonald’s also faced some roadblocks in China- Lacking of quality supplies and
distribution difficulties.
4.0 Strategies for Overcoming the Problems

To minimize the problem which we discussed above, McDonald’s scoured the

country for supplies, contracting for such items as milk, cheddar cheese, and beef, to
ensure the ample supplies of the quality products, McDonald’s educated the soviet
farmers and cattle ranchers and In addition, it built food processing center for quality
products.

5.0 Learning from this Case

To expansion a business outside of the home country than inside, we need to

consider-

 World economic situation

 Long-term demographic condition
 Lifestyles trends
 Competitive environment of that market
 Stage of development of that country
 Potential effect of existence conditions
 Considering new market condition

6.0 Recommendation

Here we recommend two things by which McDonald’s can be indentified their future
worldwide operations and where they should give more focus on expand their market
on our point of view.

Suggestion for the Future of McDonald’s Worldwide Operations

As part of its global expansion, McDonald's decided to enter China and Russia had a
huge potential. In future McDonald’s should continue its operations in those countries
in which they have the high potentiality of making profit. They also need to close

their unproductive stores. They should target those countries where economics are
relatively stable and returns are strong.
McDonalds should continue to focus more on the United States, Canada, and
Europe

McDonalds should continue to focus more on the United States, Canada, and Europe;
because economic growth is positive and stable economic condition belongs to these
countries. They should expect to add 1,300 to1, 400 McDonald’s restaurants in 2002.
About 60 percent of these openings should be in the U.S., Europe, and Canada, where
economies are relatively stable and returns are strong. They can also add restaurants
in China, where the near- and long-term growth potential is enormous. At the same
time, they can reduce openings iii-markets with weak economic environments until
the signs of improvement.

7.0 Conclusion

This case is fully regarding about all the problems & prospects which McDonalds had
to face in case of capturing emerging markets. When McDonalds begun its operation
in Russia in 1990 for the first time. It faces many problems. As Russia is a communist
country McDonalds had to face political threat such as Russia central authority were
not agree to permit it to build a restaurant. In 1998 Russian economic collapsed
because of the devaluation of the ruble, Macdonald’s record of in Russia did a
turnaround. McDonald’s had 73 stores by the end of 2001 in Russia. In McDonald’s
2001 annual respond its success in China, Russia and a couple of European countries
that is one of the few positive notes. 2001 was one tough year for McDonalds all over
the world. The continued economic crisis in Asia and Latin America and economic
recessions up to reduced profits in 2001. In 2001 McDonald’s had to close down 163
unproductive stores in countries whose economies are struggling.