There was a time when people only had access to
products and services within their city, let alone country. Buyers had to
travel to different places to get access to these services. International
business has always been there since ancient times where countries used to
trade goods. But globalization came into existence in the 20th century with
business expanding their operations to different parts of the country and the
world. Operating in different countries successfully needed new business
strategies to adapt to local conditions.
As
a child who grew up in India, McDonald’s is a huge deal to me. It was the first
American fast-food chain to enter the Indian market and hence had the
first-movers advantage. Since it opened its first store in 1996, it has grown
to be a well-known, well-established brand in India with over 400 stores
operating in the country. It had introduced burgers and fries which was very
exciting to the middle-class Indian population of 2.5 million in the 1990s. To
do so, it had to adhere to religious beliefs and culture (not serving
beef and ham) and localize their products by offering a wide variety of
vegetarian burgers and sauces. McDonald's worked with Indian farmers and
researched for 6 years to develop a supply chain which ensured high-profit
margins and continuous supply of high-quality raw materials.
Porter's
five competitive forces are used to analyze an industry and help evaluate the
business strategy of a company. My analysis for McDonald’s India is as follows
Threat of New Entrants
The
barriers to entry are very low in the food industry, hence the threat of new entrants
is high.
McDonald's
operates in Tier 2 and Tier 3 cities in India which is currently untapped by
its competitors in the US like Burger King, Taco Bell which operates in
Metropolitan cities in India.
Bargaining
Power of Buyers
The
bargaining power of buyers is high when it comes to fast food in India. To
minimize the risk that it faces from local vendors and to stay relevant,
McDonald's India keeps innovating and adding new products to the menu. This is
different from its US strategy of offering a limited menu to choose from.
Moreover, I have noticed from personal experience that McDonald's changes the
taste of the same product in different states of the country to the liking of
the locals.
Bargaining
Power of Suppliers
The
bargaining power of suppliers is low as there are many suppliers. Beverages can
also, be easily substituted with one of the competitors like Coke could be
substituted with Pepsi.
Threat
of Substitutes
With
the rise of awareness of the need for a healthy lifestyle, fast-food chains are
facing a threat from healthy substitutes like salads and home-cooked food. This
along with many other substitutes for local fast-food vendors are increasing
the threat of substitutes.
Rivalry
among existing competitors
The
rivalry amongst existing competitors is high as fast food is still an untapped a market in many parts of the county. Localization of food is only one part of
the strategy of being successful in the market. Fast-food chains are now
undergoing digital transformation, introducing timed home deliveries and
catering to the highly demanding Indian population which focusses on tasty
(read spicy) and affordable food.
In
conclusion, McDonald’s India did have a first-mover advantage in 1996 but it is
still innovating and changing strategies to keep up with the ever-changing
market. This conclusion could be extended to any business that it must
continuously adapt and change strategies to be successful.
References:
(1)
Porter,
M. (2014, June 10). The Explainer: Porter's Five Forces. Retrieved from https://hbr.org/video/3590615226001/the-explainer-porters-five-forces
(2)
The Four Global Forces Breaking All the Trends
(McKinsey Quarterly, April 2015); https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-four-global-forces-breaking-all-the-trends
(3)
Article: The Five Competitive Forces That Shape
Strategy(Porter, Harvard Business Review, January 2008)
(4)
(n.d.).
Strategic Analysis Of Mcdonald In India Business Essay. Retrieved from https://www.ukessays.com/essays/business/strategic-analysis-of-mcdonald-in-india-business-essay.php
(5)
Gauba,
V. (2015, April 2). India's fast-food industry is becoming a major market.
Retrieved from https://www.cnbc.com/2015/04/02/indias-fast-food-industry.html
(6)
Learning,
L. (n.d.). Introduction to Business [Deprecated]. Retrieved from https://courses.lumenlearning.com/wmopen-introbusiness/chapter/globalization/
(7)
(2003,
November 10). Globalization: The Strategy of Differences. Retrieved from https://hbswk.hbs.edu/item/globalization-the-strategy-of-differences
(8)
(n.d.).
Thank you For Giving Us the Opportunity. Retrieved from https://www.mcdonaldsindia.com/our_story.html?v=3
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