What mode of entry, or what current mode of operation do you recommend for your selected country?
For McDonalds to effectively penetrate the Indian fast food market, they first need to analyze the proper entry mode in the foreign country. A joint venture mode of entry, is the transactional mutual association between at least two self-governing companies that form a new legal entity, with the two companies as the sole owners, according to Meer-kooistra and Kamminga. This mode of entry is recommended for the establishment of the McDonalds in India. A joint venture is reliable since the two related companies have a common goal of achieving success, therefore opportunistic behaviors by the host company are unheard of. Additionally, the companies equally share costs and profits realized in the joint venture. In addition, with the establishment of the joint venture, McDonalds can obtain a good understanding of the Indian market in terms of the environmental factors including the Indian culture and economy, which directly have an impact on their products. Moreover, the foreign trade barriers are outdone and the access of resources is eased.
- 2. I s there a culture market for the product/service in your selected country? What must the company be aware of to ensure a market for the product? What factors will affect the consumer demand for the product/service in your selected country?
India is well known for its religious Hindu culture, which is embedded in their daily lives routine. The culture’s philosophy originates from Indian religious books, as well as their beliefs sourced from scriptures. According to Bennett et al. 2010, religiously, Hindus worship God in form of idols, since they believe He is manifested in nature or creation; mostly animals, with the cow as the most sacred animal. This form of idol worshipping is the Indian root source of vegetarianism. This is why, Hindus avoid meat products totally on special occasions and some days of the week, thus insignificant consumption of meat. Therefore, McDonalds must be aware of this crucial Indian culture that affects the consumption of meat products a great deal, given that the company majors in meat products like beef and pork burgers.
Similarly, the presence of a noteworthy number of Muslims in India affects the market demand of McDonald’s products, since based on Muslims religion, consumption of pork is regarded illegal. Eating at home is yet another India’s culture practiced by many families (Deivanai and Phil). These families attach a great value on eating together, since it promotes unity among members. The preference of home cooked food equally limits consumer demands for McDonald’s products. In addition to Hinduism culture, Muslim culture, as well as eating at home culture, McDonalds must know that most people in India are diet-cautious. This group of diet-cautious people is usually vigilant about consuming fatty foods, which are considered unhealthy, hence impacting the consumer’s demand of McDonald’s products negatively.
- 3. What is the economic situation that will impact a company’s ability to operate in your selected country?
Based on India Brand Equity Foundation, 2019, India is currently experiencing a rapid economic growth rate, forecasting to be among the top three economic powers worldwide, between the next 10 and 15 years. The country’s nominal gross domestic product is approximately 12% reflecting a rise of 0.5 % since last year (India Brand Equity Foundation). The steady economic growth reflects the quality performance of different organizational sectors including the food industry. Consequently, with this positive economic situation, McDonalds are set to successful ventures in India, with the adoption of proper market entry as well as marketing strategy.
Additionally, by the end of June 2019, the India’s mergers and acquisitions activity had reached $41.6 billion (India Brand Equity Foundation), indicating a positive business performance by both local and foreign companies. Macrotrends indicates the rise in inflation rate of India, with a rise of 2.37% in 2018 as compared to 2017. The heightened rate of inflation results to high costs of products both for commercial and domestic purposes, thus directly affecting the performance of McDonalds. Similarly, inflation contributes to unemployment, which in turn affects consumer’s income, thus poor purchasing power for McDonald’s products. In addition, competition by fast food companies like KFC will pose a threat to McDonald’s performance, since KFC has an established market with the largest market share in India.
- 4. If and how should the company enter, remain, reduce, or leave your selected country?
For McDonalds to remain in the competitive Indian fast food industry market, they must formulate a workable plan and strategies. Effective leadership and management are fundamentally vital in overseeing the company’s performance and success. For successful performance of McDonalds, qualified managers and skilled leaders should be appointed. The managers are responsible for managing departments and employees while the leader assists in maximizing efficiency and attainment of the organizational goals. With skilled leaders, the McDonalds staff is positioned to deliver quality services to their customers, thus enhancing the brand loyalty. Furthermore the company should observe and implement India’s political policies, analyze the economic factors, social factors, environmental factors in addition to country’s legal aspects. Prior to McDonald’s establishment in India, the company must obtain approval from the Indian Central Government (The International Trade Administration). The approval is a legal procedure mandatory for all foreign companies seeking joint ventures in India.
Studying the economic market of India is fundamental, for the proper adoption of strategies that contribute to McDonald’s economic growth. Luckily, India is at its economic climax, assuring McDonalds its success. Critically, McDonalds must majorly incorporate vegetables in their menu instead beef and pork to satisfy the needs of their target market. Consequently, to cater for the health conscious customer, McDonalds should produce vegan products.
Bennett, Sean. “Hindu Culture.” UVU. 2010 http://freebooks.uvu.edu/NURS3400/index.php/ch13-hindu-culture.html 22 Nov. 2019
Deivanai, & Phil. “Factors influencing to Preference of Fast Food Restaurants.” IOSR Journal of Business and Management. Aug. 2016. http://www.iosrjournals.org/iosr-jbm/papers/Vol18-issue8/Version-4/C1808042025.pdf. 22 Nov. 2019.
India Brand Equity Foundation. “About Indian Economy Growth Rate & Statistics.” India Brand Equity Foundation. Oct. 2019. https://www.ibef.org/economy/indian-economy-overview. 22 Nov. 2019
Macrotrends. “India Inflation Rate 1960-2019.” Macrotrends. 2019. https://www.macrotrends.net/countries/IND/india/inflation-rate-cpi. 22 Nov. 2019
The International Trade Administration. “India – Joint Ventures/Licensing.” The International Trade Administration. 31 June 2019. https://www.export.gov/article?id=India-Joint-Ventures-Licensing. 22 Nov. 2019.
Kamminga, Pieter, & Meer-Kooistra, Jeltje van der. “The joint venture: foreign entry modes, management control, and dynamics.” ResearchGate. January 2010. https://www.researchgate.net/publication/262034713_The_Joint_Venture_Relationship_foreign_entry_modes_management_control_and_dynamics. 22 Nov. 2019