In many ways, McDonald’s Corporation has written the book on global expansion. Every day, on average, somewhere around the world 4.2 new McDonald’s restaurants are opened
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International Trade
Case Studies
McDonald’s and Hindu Culture (20 Marks)
In many ways, McDonald’s Corporation has
written the book on global expansion. Every day, on average, somewhere around
the world 4.2 new McDonald’s restaurants are opened. By 2003, the company had
30,000 restaurants in 121 countries that collectively served 46 million customers each day.
One of the latest additions to McDonald’s list of countries entered by the
famous golden arches had been India, where McDonald’s started to establish
restaurants in the late 1990s. Although India is a poor nation, the large and
relatively prosperous middle class, estimated to number between 150 and 200
million, attracted McDonald’s. India, however, offered McDonald’s unique
challenges. For thousands of years, India’s Hindu culture has revered the cow.
Hindu scriptures state that the cow is a gift of the gods to the human race.
The cow represents the Divine Mother that sustains all human beings. Cows give
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL birth to bulls that are
harnessed to pull plows, cow milk is highly valued and used to produce yogurt
and ghee ( a form of butter), cow urine has a unique place in traditional Hindu
medicine, and cow dung is used as fuel. Some 300 million of these animals roam
India, untethered, revered as sacred providers. They are everywhere, ambling
down roads, grazing in rubbish dumps, and resting in temples – everywhere, that
is except on your plate, for Hindus do not eat the meat of the scared cow.
McDonald’s is the world’s largest user of beef. Since its founding in 1955,
countless animals have died to produce Big Macs. How can a company whose
fortunes are built upon beef enter a country where the consumption of beef is a
grave sin ? Use pork instead? But there are some 140 million Muslims in India,
and Muslims don’t eat pork. This leaves chicken and mutton. McDonald’s responded
to this cultural food dilemma by creating an Indian version of its Big Mac –
the “Maharaja Mac” – which is made from mutton. Other additions to the menu
conform to local sensibilities such as the “McAloo Tikki Burger,” which is made
from chicken. All foods are strictly segregated into vegetarian and non vegetarian
lines to conform to preferences in a country where many Hindus are vegetarian.
According to the head of McDonald’s Indian operations, “We had to reinvent
ourselves for the Indian palate.” For a while, this seemed to work. Then in
2001 McDonald’s was blindsided by a class action lawsuit brought against it in
the United States by three Indian businessmen living in Seattle. The
businessmen, all vegetarians and two of whom were Hindus, sued McDonald’s for
“fraudulently concealing” the existence of beef in McDonald’s French fries!
McDonald’s had said it used only 100 percent vegetable oil to make French
fries, but the company soon admitted that it used a “minuscule” amount of beef extract
in the oil. McDonald’s settled the suit for $10 million and issued an apology,
which read, “McDonald’s sincerely apologies to Hindus, vegetarians, and others
for failing to provide the kind of information they needed to make informed
dietary decisions at our U.S. restaurants.” Going forward, the company pledged
to do a better job of labeling the ingredients of its food and to find a substitute
for the beef extract used in its oil. However, news travels fast in the global
society of the 21st century, and the revelation that McDonald’s used beef
extract in its oil was enough to bring Hindu nationalists on to the streets in
Delhi, where they vandalized one McDonald’s restaurant, causing $45,000 of
damage; shouted slogans outside of another; picketed the company’s headquarters;
and called on India’s prime minister to close McDonald’s 27 stores in the
country. McDonald’s Indian franchise holders quickly issued denials that they
used oil that contained beef extract, and Hindu extremists responded by stating
they would submit McDonald’s oil to laboratory tests to see if they could
detect beef extract. The negative publicity seemed to have little impact on McDonald’s
long-term plans in India, however. The company continued to open restaurants,
and by 2003 had 38 in the country and announced plans to open another 80 by
2005. When asked why they frequented McDonald’s restaurants, Indian customers
noted that their children enjoyed the “American” experience, the food was of a
consistent quality, and the toilets were always clean!
Answer
the following question.
Q1.
What lessons does the experience of McDonald’s in India hold for other foreign
fast-food chains and retail stores?
Q2.
Is there anything that McDonald’s could have done to have foreseen or better
prepared itself for the negative publicity associated with the revelation that
it used beef extract in its frying oil ?
Q3.
How far should a firm such as McDonald’s go in localizing its product to
account for cultural differences? At some point, might it not lose an advantage
by doing so?
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