Case Study: Mcdonald's India and Euro Disney

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McDonald's India and EuroDisney

After centuries of efforts to reduce the involvement of the governments in the economy, the modern day society is closer to creating a free and liberalized market. This has been generically possible through the opening of boundaries and the creation of a stronger and more competitive global market. Countries continue to subsidize their productions and discourage imports, as well as continue to become involved within the market through a series of fiscal policies. Nevertheless, their decisions are regulated by international associations such as the World Trade Organization, and the powers of national governments to impact the global market have significantly decreased.

In the context of market liberalization and intensifying forces of globalization, economic agents were presented with numerous opportunities of expanding their operations. Two directions are noteworthy, specifically:

Economic agents moving into foreign markets in order to benefit from the comparative advantages of the countries, such as more cost effective labor force or an abundance of specific natural resources

Economic agents moving into foreign markets in order to increase their access to consumers.

Disney and McDonald's are part of the second category as they decided to open new stores in foreign regions and to as such increase their market share and subsequent revenues. This project tracks the decisions and implementation of the entry strategies by McDonald's in India on the one hand, as well as by Disney in Europe. Specific lessons are drawn from their experiences.

2. McDonald's in India

McDonald's is the leading fast food chain in the world. Its success is due mainly to the taste of the food and the reasonable prices. Additionally, the aggressive growth strategy -- through both franchises as well as wholly owned and operated stores -- has also contributed to the creation of the strong competitive position.

McDonald's first entered the Indian market in October 1996, with the opening of two restaurants. However, prior to this, the organization had spent six years investigating the market and forming business relationships with the purveyors. Even before the actual penetration of the market, the McDonald's executives were set on choosing Indian suppliers for their commodities, rather than having them imported. The result was that of the period between 1990 and 1996 being spent on the construction of a cold supply chain. "McDonald's has pioneered the cold chain management system wherein the freshness, crispness and nutritional value of vegetables and processed products are retained" (Sidhpuria).

The organizational decision to use national suppliers was a solid logistics decision due to the large distance between the United States and India, but it was also constructed on other considerations, such as cost or operational efficiencies. In the United Kingdom for instance, the American fast food giant decided to import the commodities, due to the higher prices revealed in Great Britain. In India, the cold chain management system was complex and included not only commodities, but also services. The cold chain activities and the operations of the distribution centers are for instance managed by Radhakrishna Foodland (Sidhpuria). The construction of partnerships with local purveyors has also helped the company improve its image and reputation through the support it offered the local communities.

Another important aspect of McDonald's operations in India is constituted by the personalization of the menu to the cultural features of the market. In India the cows are held sacred and the restaurants do not sell beef. Pork is also uncommon in the Indian cuisine. McDonald's has as such adapted its menu to serve these needs. They for instance sell vegetarian hamburgers, as well as a wide variety of chicken products. They have integrated rice in their menus and they also offer an alternative to chicken -- lamb (Adams, 2007).

Today, as the internationalized economic crisis continues to take its tool on populations and economic agents, McDonald's India runs on consistent growth rates. The products have become extremely popular and the introduction of new elements on the meal has even further increased demand for the McDonald's fast food products. The increase in sales is attributed to a combination of several forces, such as:

The fact that the company creates customer value through affordable prices in times of economic hardship

The gradual, but sustained, increase in the living standards of the Indians, revealed by the increasing size of Indian middle class society

The strong marketing campaigns developed and implemented by the fast food monolith.

All these translate into the transition of McDonald's products from the occasional treat into the reliable food product. The growth rate is expected to be maintained in the future and in order to support it, the managerial team has decided to open 40 new stores, reaching as such a total of almost 200 stores in India (Bellman, 2010).

3. Disney in Europe

Disney's entry into the French market has not been as immediately successful as McDonald's penetration of India. At an incipient stage, the six years the fast food company spent on researching the market and setting business relations proved to be a valuable component of their future success. The Walt Disney Corporation also researched the European market before penetration and decided to implement an entry model based on direct investment. Walt Disney was extremely popular in Japan, where the firm had entered through licensing. In Europe, it would own 49 per cent of the theme park, while the other 51 per cent would be publicly owned (Quick MBA).

The second component of the penetration strategy was the selection of the locations for the Disney theme parks. Unfortunately, the company was unable to select the most appropriate locations and this further deepened the organizational problems with customer attraction. Furthermore, in a context in which the European countries were not as accustomed to theme parks as Americans and Asians, the corporation failed to create and implement the necessary marketing campaigns that familiarized the populations with the products and drawn them towards the products.

The company was registering financial loses and a generalized state of insecurity was created as it was undetermined whether EuroDisney would continue to operate or not. Not only that the customers were not properly addressed and attracted, those who were interested were forced to travel long distances, buy tickets in advance and face the risk of the theme park being closed by the time they got there.

Then, in order to reduce the financial losses it faced, the company decided to implement higher retail prices on its entry tickets than those it implemented in the United States. This further distanced the consumers from the company. Eventually, as the competition intensified, the Disney parks reduced their prices as well.

As the amusement parks industry segment in Europe gained more momentum, it proved more and more difficult for the company to develop. It was eventually decided to implement a series of internal processes of change. At the immediate level, the amusement park in France would be renamed from EuroDisney into Disneyland Paris. This decision was supported by the belief that EuroDisney had a negative connotation and it was associated with a difficult time at which Europe was seeking unification. A second important component was constituted by the decision to replace the managerial team. This was initially a team of American leaders, who had proven unable to understand and adjust to the European market. The new managerial team would be formed from management experts at a French group headed by Philippe Bourguinon. "These changes had a marked effect on the operation of the park. Visitor numbers recovered substantially in 1995 as it became clear that the park would stay open, and the product was made more attractive through the opening of new attractions and lowering of prices. Attendances increased from less than 9 million in 1994/5 to 10.7 million in 1995/6, just short of the park's original target of 11 million visitors. The improved performance of the park was rapidly reflected in better financial figures. Following substantial operating losses in the first two years of operation, the park began to make an operating profit in the 1994/59 financial year, as profits had risen to Frf 200 million ($40 million) by the end of 1995/96" (Laws, Faulkner, Moscardo, 1998).

4. Lessons for other organizations going globally

Based on the experiences of the two corporations in the Indian and European markets, several lessons are drawn. Specifically:

a) It is of the utmost importance to assess and understand cultural differences between the country of origin and the country of destination; the failure to understand the differences could easily materialize in overall organizational failures in the respective foreign market.

b) Companies have to not only recognize the local cultures, but it is imperative for them to adapt their product offer and other components of the business strategy in such a manner that these reflect the needs and values of the local culture.

c) The use of local suppliers is generally a positive decision as it creates cost and operational efficiencies and it also improves the corporate image through the support of communities. Exceptions can however occur and… [END OF PREVIEW]

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