Case study --- Business Environment --- McDonald’s -- part 1

19-7-17

Every business has to work in an environment which is popularly known as Business Environment. There are five dimensions or elements of Business environment one of which is economic environment which saw sea changes in India in 1991.   

In 1991, INDIAN economy faced a serious foreign exchange crisis, together with high government deficit and  rising prices. There was only one lucky event – India had bumper crops that year.

As a part of economic reforms, the then Government of India announced a new industrial policy in July 1991, which left lasting impact on the future of Indian economy.

The policy got favorable response from many multinationals as India was open to them and proposals of many Joint Ventures started pouring in. One of such company was McDonald's @McDonalds (27.5 billion dollars company) which was looking to enter into Indian territories for further growth.

Finally McDonald’s entered in India in 1995. It selected two Partners Amit Jatia and Vikram Bakshi.

McDonald’s has around 34,000 outlets in more than 180 countries. It has opted two business models

A. License Model-Giving license to a local player for an agreed fee together with a royalty linked to sale that is more the sale more the amount of royalty McDonald’s get. Company prefers this model as it is has low risk and minimum hassle. 80% of 34,000 outlets runs on this model.

B. Ownership model- where McDonald’s invested money by entering into a Joint venture and was followed in developing countries. 

In India it followed Ownership model with 50-50 Joint venture for 25 years i.e 1995 to 2020. However, it preferred two partners instead of one.  Amit Jatia  was to control south and west of India whereas  Vikram Bakshi was to control North and East of India.

Interestingly both of the partners who were selected were from real estate business and not from food business or restaurant business. This is normally done to avoid conflict in future and to have upper hand in the operational management to safeguard its investment and expansion rights.   

NEXT PART 2.....

Q.1 which principle of Fayol is followed by McDonald's?
      

Q.2 which two managerial response were opted by McDonald's?
     

Q.3 which level of management is involved?
     

Q.4 which environment has been targeted by McDonald's?
   

Q.5 which environment has been used by McDonald's?

     

COMPOSED BY   PATHAK SIR   @pathaksirbst ( at twitter)

send your views at avnishpathak18@gmail.com or at  @pathaksirbst ( at twitter)

To be continued.....