A Report on Internationalization Strategy of McDonald.edited

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1 A Report on Internationalization Strategy of McDonald's Entering the Indian Market Name Institution Course Instructor Date

2 Executive Summary One of the most well-known fast-food chains in the United States is McDonald's, which is known for its wings, fries, and shakes. It had more than 39,000 sites in more than 100 countries and regions worldwide by 2020. This executive summary looks at McDonald's move into India as an example of how the company plans to grow internationally. India is a great business opportunity because it has the second-largest number of people in the world and a middle class that is growing quickly. However, the fast-food business has to deal with some unique problems, such as most Hindus prefer meatless food. Changing the food to reflect national and religious beliefs is very important. Some fast-food chains could get a bigger market share before McDonald's came along because they understood these differences. McDonald's entered the Indian market at a good time—around the middle of the 1990s, when economic reform made it easier for foreign companies to do business. It went in as a joint venture and opened its first store with local partners in New Delhi in 1996. Problems included limited space, issues with the supply chain, and protests against McDonald's meat options on the menu. McDonald's translation plan included many changes to the menu, like adding more vegetarian options and making meat and veggie food in separate areas to respect religious concerns. McDonald's has stayed competitive in the Indian market over time thanks to this, and its global supply chain always meets high standards for food safety and quality. By 2020, McDonald's had opened more than 320 restaurants in India's biggest cities. This was the fastest growth rate of any of the major restaurants around the world. Still, local companies have more stores than other companies, which shows the competition. McDonald's has also put a lot of money into business social duty, ensuring it fits the local growth goals.

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4 A Report on the Internationalization Strategy of McDonald's Entering the Indian Market Introduction A business can find new sales possibilities and markets whenever it goes global. This makes the company more scalable and increases its income potential. Businesses that go global can also access native knowledge, resources, relationships, and in some cases, lower costs by shopping around. However, because of globalization, brands, goods, and positions must be changed to fit new cultural settings, customer tastes, and local laws in different host nations. When starting a globalization strategy, it's important to consider the goals, time, choice of target markets, and entry modes. This paper uses McDonald's move into India as an example of why global food store chains enter new markets and what makes them successful. As the largest fast-food hamburger company in the world, McDonald's started expanding into new areas like Canada and Puerto Rico in the late 1960s. From the 1970s to the 1990s, all major global consumer markets saw fast growth in foreign markets. McDonald's had more than 39,000 restaurants in more than 100 countries and regions worldwide by 2020. Even though the United States still brought in the most money for the company, this foreign presence brought in almost 70% of its total sales earnings. So, McDonald's must continue to grow and expand its foreign footprint if it wants to keep making money and be a star in the fast food business worldwide. India was a very appealing but challenging business because of its large population and growing middle class with more money to spend. However, the solid Hindu religious views, the associated cultural practices, and the wide range of taste choices made it necessary to make significant changes. Local companies that were already in the market and knew more about how customers behaved also posed tough competition. It is important to look at how McDonald's handles these issues carefully, such as its choice of entry times and modes, as well as changes to its food, store layout, and brand placement. This will help us figure out how well its overall globalization plan works. There are four more parts to this story, which are listed below. – First, the background information goes into more detail about McDonald's current world operations, as well as the Indian fast food industry's market trends and cultural traits. The second part looks at McDonald's thorough plan to enter the Indian market. Third, McDonald's approach to localization across all areas and its corporate social responsibility efforts are examined. Lastly, the conclusion summarizes the study's main points and what they mean for international companies that want to expand into developing customer markets. Background on McDonald's McDonald's started as a small drive-in restaurant in 1940 San Bernardino, California. It was started by brothers Dick and Maurice "Mac" McDonald. In the mid-1950s, businessman Roy Kroc bought the chain with the intention of quickly growing businesses to make McDonald's the biggest food service company in the world. By 1983, McDonald's had more than 10,000 restaurants in more than 50 countries on every continent except Africa. That year, sales went over $10 billion, making it the most prominent food service company in the world by sales. McDonald's has more than 39,000 restaurants in over 100 countries and is expected to make over $21 billion this year. McDonald's was one of the first fast-food chains, and their main products were cheap, easy-to-carry hamburgers, fries, and drinks that could be drunk on the go. McDonald's has grown widely over the past 40 years thanks to a tight focus on critical products, stable product quality, fast service, kid- friendly stores, and flexible designs that can be changed to fit different markets. As of 2020, McDonald's is still the world's most significant fast food business by number of locations, and its name is worth more than $130 billion. Based on sites across the globe, Yum Brands (which includes KFC, Pizza Hut, and Taco Bell) and Subway come in next. McDonald's has stayed ahead of the

5 competition in a very competitive market by constantly coming up with new food items, McCafe specialty coffee, digital ordering booths, and drive-thrus that offer better value to customers. In the late 1960s, McDonald's expanded outside the United States by opening restaurants in Canada and Puerto Rico. During the 1970s, it mainly focused on other rich Western economies. Eventually, it spread to Europe, Japan, Australia, and New Zealand. McDonald's rapidly expanded into new markets worldwide starting in the 1980s, following the model of its early foreign wins. These new markets included China, India, the Middle East, and Eastern Europe. Notably, there have been a few big fails, despite problems with supply lines, item replacements, and local cultural situations that need to be considered. McDonald's kept growing internationally even though markets were unstable and there were risks. They did this by taking advantage of three main factors: the vast number of customers around the world, the fact that some countries had higher profit margins and better supply chains than the U.S., and the fact that they wanted to make their brand more well-known as a symbol of American culture around the world. For the Indian market potential, learning from its successes and failures in different markets like China made it clear that new products must be made that fit local tastes and be ready to accept religion and cultural preferences. Host Market Analysis India, which has more than 1.3 billion people and a middle class proliferating, was appealing and challenging for McDonald's global growth plans. Starting in the early 1990s, India's GDP growth sped up, and the country became more connected to the world of trade through political changes and economic openness. The policy push worked; India's GDP per person nearly doubled, rising from $370 in 1994 to over $600 by 2004, when McDonald's opened in India. With their better spending salaries, the growing middle class was a good target market for fast food, which was a pretty niche idea until then. Wimpy was India's first fast food business. It opened in the 1980s and finally had 15 sites across the country. When McDonald's first came to India in 1996, the country's fast food market was worth $105 million, most of which was in the top four cities. Still, this market area grew by 25–30% each year in the 1990s, and it was expected to become a $1 billion business by 2005 as national supply lines and real estate facilities improved. Besides big international names, Indian chains like Jumbo King that cater to vegetarian tastes quickly became the market leaders in their respective categories. People really liked Jumbo's aloo tikki burger, which showed how the market could support locally-made meals. McDonald's used this information a lot in its translation plan. Even though there was a lot of promise, stagnant mass buying power made it hard for fast-food chains to make a lot of money in the 1990s. At that time, most global brands like Domino's that came to India were aimed at wealthy urban leaders. Making money depended on speeding up usage once wages for the mass market increased. Sociocultural views on eating meat and being a vegetarian made it hard to come up with new menus and plan stores. Cooking areas had to be separated so that vegetarian and non-vegetarian foods would stay consistent because breaking religion rules could lead to a backlash. Indian tastes for sauces and flavors also meant that products had to be reformulated in order to be accepted by the market. On the other hand, youths' growing interest in global consumer culture and exposure to Western names created business possibilities. Overall, customized localization of sources, products, and shop forms aligned with local tastes and dietary habits was vital to opening the entire host market. Motives for Entry India's huge population, fast development, and rise of a wealthy middle class hungry for Western brands made it an appealing market for McDonald's, as shown by its slogan "billions served" worldwide.

6 By 1996, McDonald's had surpassed $30 billion in yearly sales, making it the biggest chain in the world. But the U.S. market was getting older; store sales growth had stopped rising. So, the main reason McDonald's decided to expand into India was the massive size of the market compared to most other countries. This would help the company to continue its meteoric growth over the long run. Indian business was just starting to become more open in the early 1990s. So, McDonald's entry in 1996 happened when being an early player could have been advantageous before competing companies arrived to take advantage of the billion or more customers. Restaurants like KFC (1995) and Pizza Hut (1996) came to India around the same time that McDonald's did. So, getting an early start on such significant competitors was essential for getting customers to know the McDonald's name and finding the best locations in major cities. McDonald's reasons for joining India were more than just increasing sales and expanding its reach to maintain market control. They were also related to brand management and building the company's global image. McDonald's could improve the value of its name around the world by joining one of the consumer markets that is growing the fastest. Its image for corporate social responsibility got better when it changed its products and shop layouts to serve veggie food and respect religious beliefs. This made it easier for the company to talk about itself in a good way as a culturally sensitive one, and it might have stopped pushback in other conservative markets that are worried about diet problems and becoming too Americanized. The joint venture way of entering the market was also cheaper, making it easier to use the market knowledge of local partners while lowering risks. McDonald's supply chain ecosystems, which promote efficiency, ecology, and food security, were a strategic tool for improving the company's image. These ecosystems were especially valued in developing countries. Local businesses still knew what people wanted best, but McDonald's innovative partnerships and careful global sources made the company look more trustworthy. Aside from sales and earnings, the goal to become the most-known food service name was also important. India's young English-speaking city dwellers and growing middle class were the perfect places to start building brand awareness before going national. Overall, McDonald's strategy thinking with India included customer targeting needs and global brand image concerns related to responsible growth, reducing destructive externalities, and communicating across cultures. Given the country's complicated social and political landscape, combining profit with purpose was smart. Market Entry Strategy Choice of Entry Mode When McDonald's first came to the Indian market in 1996, it used a joint venture business plan. That is, it worked with Hardcastle Restaurants Pvt. Ltd is a developing partner run by businessman Vikram Bakshi from Delhi and Amit Jatia from Five Star Hotels in Amritsar. McDonald's formed a financial partnership with Connaught Plaza Restaurants in 1994 to expand into Northern India. But terms of secrecy limited what could be done. Taking out Connaught in 1995, the new partnership with Hardcastle Restaurants and Jatia's business ended the first joint venture and gained the right to grow the whole country. Instead of going the path of direct ownership through a wholly-owned company or leasing, the joint venture method was the best way to combine practical control, regional knowledge, lowering risks, and sharing resources. As the first quick-service restaurant to use a system, McDonald's kept an eye on all of their sites to ensure their food quality was the same. This was in line with their strategy to enter new markets. But India was challenging to work in because of its different food customs, religious views on beef and pork, and people's taste preferences. Working with local business owners who had a lot of connections sped up the process of setting up a supply chain and managing goods in a way that made

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7 sense for the situation. The diversity of ownership also reduced risk in India's heavily controlled and bureaucratic food and beverage industry, which limited foreign engagement. Market Entry in Stages McDonald's carefully planned its entry into the market, which happened slowly over three critical times. Starting in 1990, a lot of field study was done to find the best possible partners and research the competition, government rules, the supply of land, and site selection factors. The focus on zone-wise tier-1 cities for debut stores showed the company's desire to get high-income urban leaders to try the food before making changes for the mass market. Hardcastle Restaurants and Five Star Hotels were given exclusive national business rights in 1993 based on their multigenerational solid food and beverage backgrounds and local ties. Over the next three years, work focused on bringing merchandise and cooking equipment, creating shop designs sensitive to religious differences by setting aside places for vegetarian and non-vegetarian food preparation, and finishing supply lines across the country. In October 1996, the first Indian McDonald's opened, right next to the fancy Connaught Place shopping area in central Delhi. The public saw Shalini and Vikram Bakshi, along with Amit Jatia, as the faces of the JV. This showed their commitment to local involvement in McDonald's Indian version. New menu items that would appeal to people at home were quickly tried, while signature dishes like the McAloo Tikki (potato burger) were quickly approved. By 2004, McDonald's had 54 restaurants in India. They were moving into its second stage, which focused on localizing the menu, finding more veggie suppliers, and using value prices to get a foothold in the mass market. Competitiveness Analysis When McDonald's came to India in 1996, it was behind Indian companies in understanding how people liked fast food because most Indians are vegetarian. Homegrown brands like Jumbo King had already shown that people wanted locally made foods by showing that its aloo tikki burger was a hit. It had a strong national footprint with 85 locations by the time McDonald's came along, thanks to being the first company to organize its supply chain for ten years, and being familiar with the market. However, McDonald's stuck with it through the early growth pains by using its well-known name, strict international supply chain, and consistent product quality to set itself apart from competitors. By 2004, it had 54 stores in India, making it the foreign chain with the fastest growth. Regarding store count, Domino's had the most at the time. KFC and Pizza Hut each had less than 15 places. Global companies entering India found it hard to increase compared to local companies with better access to resources and stock, even if their brand name was lower. However, McDonald's showed its strength in the market by being ready to change its meals to suit vegetarians and try different amounts of spice to suit local tastes. Cost savings from importing frozen fries and highly optimized store cooking plans that made preparation more efficient also helped the business stay competitive. McDonald's made significant investments in cold storage supply facilities to keep food quality standards high in India's hot climate, which is something that other companies didn't do at first. McDonald's beat out local competitors by giving customers a unique experience through play places for kids and clean, air-conditioned stores. Positioning as a desirable "hang-out" spot was vital in attracting the rapidly growing middle class under 35 age group in Tier-I and II towns. McDonald's got much attention when it ran city-specific TV, radio, and print ads by focusing on good spots in the busiest shops, roads, and subway stops. As people's buying habits changed, a globally organized marketing strategy and bigger war chests for sales helped people become more familiar with the product. By 2020, McDonald's had over 320 stores in India, mostly in big cities. This was the fastest rate of growth among its foreign burger competitors. Making signature dishes like the McAloo Tikki Burger

8 national faves brought attention to the company's production and sourcing skills; now, nearly 65% of its products come from nearby. After localization, it was also possible to add famous menu items like Paneer Wraps, Maharaja Mac, and Eggless Mayonnaise. Regional veggie brands are still popular, but McDonald's strategy of matching global brand identity with real product-market change to stay ahead of the competition is getting harder and harder for even giants that come in. Corporate Social Responsibility McDonald's had difficulty keeping up with ethical and sustainable buying methods in a country as big as India, where religious issues are complicated. As a global chain that relies on quickly importing products that meet high-quality standards across the country, claims of environmental carelessness or food safety violations could hurt the brand's image and ability to attract new customers. So, from the start, McDonald's carefully engaged in areas like community development, environmental sustainability, and open supply chain management to lower risks and boost its image as a socially responsible company. Ronald McDonald House Charities (RMHC), the company's main social responsibility program, ran programs in India like the Family Rooms program, which helped families of seriously sick children getting care at nearby hospitals find temporary housing. Reaching out to the community during tragedies like the Gujarat earthquake in 2001 or the Indian Ocean tsunami in 2004 showed that social promises aligned with localization goals. This earned more respect than just making money. McDonald's partnered with the non-profit Magic Bus to help poor kids learn new skills. This was done because India has a long history of problems with child health and nutrition. On a separate note, its "Return to Work" program hired people with disabilities and people who had been through acid attacks, showing that the company was open to new ways of hiring that were sensitive to social issues. As part of efforts to be more environmentally friendly, stores and delivery centers got structures for collecting rainwater, and recyclable paper straws were used to show that trash was being managed more effectively. During the Covid disaster, more than 100,000 PPE kits and face shield visors were given to healthcare workers to show that they were getting prompt, trustworthy support. Following religious rules about not eating beef or pork, along with strict regulations for vegetarians and separate places for cooking, led to essential product choices that showed respect for local cultural feelings from the start. McDonald's also spent money to teach farmers in its potato supply chain about good practices that help the earth, such as saving water, keeping the land healthy, and reducing crop trash. Its Progressive Young Farmers (PYF) training program taught over 13,000 Indian farmers by 2020 how to use safe farming methods and technology together. McDonald's commitment to localization in every way, from hiring and community involvement to supply chain honesty and environmental friendliness, made it easier for the company to live up to its core brand vision of "making great-tasting, feel-good moments easy for everyone." Globalization became more open by taking religion and cultural views into account. Along with consistent product quality and transparent sources, its India CSR plan focuses on careful compliance in the food industry and service to stakeholders in an Asian giant that is very different from one another. Evaluation and Conclusion McDonald's perfectly timed its entry into the Indian market in the mid-1990s, when the country was steadily becoming an economic giant. At the same time, first-mover advantages over competitors were at their highest. Choosing the partnership route over traditional franchising or company models made the goal of cultural literacy clear from the start. This is a crucial success factor when joining complex, multidimensional markets like India that need policy navigability with complexity. McDonald's made smart infrastructure investments early on in unique supply chain software and a cold storage transport backbone. These investments will help the company's organized product

9 distribution work more efficiently in the long run. Localization was also a big part of planning the layout of Indian stores, which meant there had to be different areas for making food for vegetarians and non- vegetarians to respect religious differences. Investing in training programs that give young Indian farmers more and better skills in sustainable agriculture for food security shines a light on the need for strategic clarity in dealing with negative environmental impacts while expanding internationally. By 2020, McDonald's had more than 320 restaurants in India, mostly in big cities. This was the fastest time for any significant global burger competitor to enter a new market. Streamlining the farm-to- fork value chain and adding new, locally-inspired items to the menu for one-third of the items offered to suit ethnic tastes showed genuine dedication to product-market fit from the start. Its primary strategy for dealing with local pure veggie brands that have their own products was to focus on being different rather than being cheap. Generally, McDonald's Indian plan meets all the requirements for a fast entry sequence, leveraging partnerships and local talent, controlling the supply chain with a focus on localization, and ensuring the product is suitable for the market to appeal to the target audience. Its commitment to cultural literacy in areas like hiring, community service, supply chain ethics, and environmental sustainability made it easier for the company to carry out its core brand strategy, even in Asia's most diverse markets. For foreign companies entering India, especially those in the retail sector, McDonald's success in the market shows how important it is to spend early in supply systems so that companies can grow even when there are problems or gaps in the area. When entering a market, using a flexible strategy that changes based on new competitors and changing customer tastes is also very important. Ethical sourcing, product deletion-adding, and being sensitive to stakeholders are all examples of responsible localization that help build trust and brand goodwill over time among various groups. Lastly, McDonald's experience shows that going global requires a long-term view of Asia, a complicated region. Focusing on the basics like product-market fit, competitive difference, and consistent customer value propositions will pay off in the end, even if it initially seems slow.

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