Case study of McDonald's named "At The Receiving End". Talks about McDonald's venturing into India.

1. McDonald’s
CASE STUDY
BY PREETAM PEEUSS

2. AT THE RECEIVING END!

3. ABOUT McDonald’s
FOUNDED:
• McDonald’s BAR-B-Q, May 15, 1940
in San Bernardino, California
• McDonald's Corporation, April 15, 1955
in Des Plaines, Illinois
HEADQUARTERS:
Oak Brook, Illinois
MASCOT:
Ronald McDonald
CHAIRMAN: Andrew J. McKenna
PRESIDENT & CEO: Don Thompson
TOTAL EMPLOYEES: 1,800,000
World's largest chain of hamburger fast food restaurants:
118 countries – 34,000+ locations – 68 million+ customers daily
(as in 2013)

4. ABOUT McDonald’s
• McDonald’s is committed to providing the highest quality food and superior service, at a great
value, in a clean and welcoming environment.
• At the restaurant level, McDonald’s is focused on energy conservation, sustainable packaging, and
waste management.
• GOAL:
Quality, service, cleanliness and value (QSC&V) for
each and every customer, each and every time.
• BUSINESS MODEL:
“Three-legged stool” of owner/operators, suppliers,
and company employees.

5. ABOUT McDonald’s

6. ABOUT McDonald’s

7. McDonald’s MENU

8. McDonald’s MENU

9. HISTORY OF McDonald’s
• Richard & Maurice McDonald built hamburger stands
with golden arches in California.
• 15¢ hamburgers were very popular.
• Ray Kroc, a milkshake machine salesman, bought
world franchise rights from them and spread the
golden arches around the globe.
• Kroc partnered with the brothers, and within a few
years turned their small idea into the huge franchise
that would become the McDonald's Corporation.
• Kroc became frustrated with the brothers' desire to
maintain only a small number of restaurants.
• In 1961, he purchased the company from the
brothers for $2.7 million.
Ray Kroc
The original staff of the
McDonald's brothers hamburger restaurant

10. HISTORY OF McDonald’s
The First McDonald’s

11. ACROSS THE GLOBE
• McDonald’s depends on its overseas restaurants for
revenue.
• Annual revenues for 2012 – $27.5 billion
REVENUE GENERATED
US
Europe
APMEA
Other Countries
6%
32%
22%
40%
• It is one of the world’s best known brands.

12. ACROSS THE GLOBE
INTERNATIONAL FRANCHISING
FINANCIAL REQUIREMENTS/DOWN PAYMENT
• Initial down payment
 new restaurant – 40% of the total cost
 existing restaurant – 25% of the total cost
• The down payment must come from non-borrowed
personal resources.
• A minimum of $750,000 of non-borrowed personal
resources.
FINANCING
• Remaining balance of the purchase price may be
financed for a period of no more than 7 years
• McDonald’s does not offer financing

13. ACROSS THE GLOBE
INTERNATIONAL FRANCHISING
ONGOING FEES
• Service fee: a monthly fee based upon the restaurant’s sales performance (currently a service
fee of 4.0% of monthly sales).
• Rent: a monthly base rent or percentage rent that is a percentage of monthly sales.

14. ACROSS THE GLOBE
• Spread American culture in East Asian countries.
• Clean restrooms set new standards in Hong Kong and Taiwan.
• Introduced celebration of birthday parties in its restaurants in Hong Kong.

15. CRITICISM
•
•
•
•
•
Jose Bove, a French sheep farmer, led a campaign against McDonald's.
Ransacked McDonald’s restaurant construction site.
Part of French delegation to Seattle – protesting against commercialization of food crops by WTO.
Was against industrial farming.
McDonald’s – symbol of globalization, implying standardization of food through industrial farming.
• When US attacked Afghanistan in 2001, Pakistanis damaged McDonald’s restaurants in Islamabad.

16. McDonald’s IN INDIA
FRANCHISING IN INDIA:
McDonald’s Corporation has entered into JV’s with
two companies to develop, open and operate
McDonald's restaurants in India.
North & East India:
Connaught Plaza Restaurants Private Limited
("CPRPL")
South & West India:
Hardcastle Restaurants Private Limited
("HRPL")

17. McDonald’s IN INDIA
• Entered India in 1990s.
• Majority of Indians did not eat beef.
• Muslims did not eat pork.
• Food items were segregated into
Veg and Non-veg
• Introduced Maharaja Mac and
McAloo Tikki

18. McDonald’s IN INDIA
• In 2001, an Indian businessman sued McDonald’s for misrepresenting its French fries as vegetarian,
when they contained beef broth as “natural flavor”.
• McDonald’s admitted to mixing beef extract in the oil.
• Settled the suit for $10 million.
• Labelled ingredients of all food items.
• Special care is taken to ensure that all
vegetable products are prepared separately,
using dedicated equipment and utensils.
• Mayonnaise and soft serves are also 100%
vegetarian.
• Uses only vegetable oil as a cooking medium in
India.

19. ACCOLADES
GOLDEN ARCHES THEORY OF CONFLICT PREVENTION
• Thomas L. Friedman said in The Lexus and the Olive Tree that no two countries with McDonald's
within their borders have ever been in a war since having a McDonald's.
BIG MAC INDEX
• It is published by The Economist as an informal way of measuring the purchasing power parity (PPP)
between two currencies and provides a test of the extent to which market exchange rates result in
goods costing the same in different countries.

20. THE QUESTIONS

21. What lessons can other MNC’s learn from the experience of
McDonald’s?
• Globalization is still not accepted by all classes of people.
• Actions of one’s own country can affect the business in another country.
• One should be completely aware of the culture, society and food habits prevailing
in the target market.
• One should not mislead customers in any way.
• One should be able to create products based on the needs of the customers.
• Standardization of quality, service, cleanliness and values – no compromise.

22. Aware of food habits of Indians, why did McDonald’s err in
mixing beef extract in the oil used for fries?
• Beef extract is the only natural flavor in McDonald's French fries.
• Using ''natural flavor'' as a synonym for beef extract is within federal Food and Drug
Administration guidelines.
• McDonald’s wanted to maintain the taste of French fries globally.

23. How far has McDonald’s succeeded in strategizing and
meeting local cultures and needs?
• Connected local suppliers with international suppliers and encouraged them to
form JV’s.
• Handshake agreements with suppliers.
• Sharing of best practices within suppliers.
• Introduced region-specific food items.
• Developed products that the local market wants and at disruptive price points.
• Innovative practices – dedicated R&D.
• Standardization.
• Developed user friendly environment for consumers.
• Involved in Charity.

24. THANK YOU