It is too early to say that McDonald’s has succeeded in India. Nine years after McDonald’s first set up in India, the burger giant has yet to make any net profit.
According to McDonald’s management, each McDonald’s store in India takes about five to seven years to break even.
Part of the reason for this long break-even period has to do with the investments required per store in terms of expensive process control equipment (that the company imports from abroad) and acquiring prime location real estate properties.
However, compared to 12-13 years that McDonald’s takes to break even in any new country the company enters, India’s break-even time is actually more favorable. One reason for the quicker breakeven in India is the reduction in the per-store investment that McDonald’s has managed to achieve with indigenization.
McDonald’s per-store investment in 2003-2004 was 33% less than its per-store investment in 1996 in India. Going by McDonald’s expansion, an impressive 50% annual revenue growth since 1997, and growing popularity, it is reasonable to argue that McDonald’s operations in India have achieved decent success.
McDonald’s couldn’t have achieved the success without appealing to new generations of consumers— children 3 to 14 and their busy parents’ nurturing needs. In a recent survey by Synovate, a global market research agency, 20% of young Indians between the ages of 8 and 24 reported their preference for McDonald’s products, followed by Pizza Hut (11%) and then KFC (2%).No amount of advertising and brilliant promotions could have done the trick alone. In India, McDonald’s did not create a market where none existed.
It merely responded to an opportunity presented by the changing Indian socio-cultural values and sustained economic liberalization. McDonald’s strategy of positioning itself as a family restaurant with an emphasis on local menus and local values seems to be working well in India. But to what extent McDonald’s can continue its growth in India remains uncertain.
McDonald’s is more than just another American fast food chain. It carries a symbolic load of Americanness—American variant of capitalism and its overwhelming domination over the global economy. It is also a symbol of American cultural imperialism.30 For this reason, McDonald’s operations in India, like other parts of the world, will continue to face opposition from religious fundamentalists, environmentalists, protectionists, animal rights activists, and antiglobalization protestors.
Already, McDonald’s outlets in Delhi and Thane (on the outskirts of Mumbai) have been the targets of violent protests from the Hindu militant groups led by the Shiv Sena (the right-wing Hindu nationalist group) after the company was sued in the United States over the use of beef extract on its French fries. McDonald’s public assurance that it does not use any animal extract in vegetarian foods in India and the clearance certificate the company got from the government agency Brihanmumbai Municipal Corporation (BMC) took the steam out of this kind of politically motivated violent protests
for the time being..
According to McDonald’s management, each McDonald’s store in India takes about five to seven years to break even.
Part of the reason for this long break-even period has to do with the investments required per store in terms of expensive process control equipment (that the company imports from abroad) and acquiring prime location real estate properties.
However, compared to 12-13 years that McDonald’s takes to break even in any new country the company enters, India’s break-even time is actually more favorable. One reason for the quicker breakeven in India is the reduction in the per-store investment that McDonald’s has managed to achieve with indigenization.
McDonald’s per-store investment in 2003-2004 was 33% less than its per-store investment in 1996 in India. Going by McDonald’s expansion, an impressive 50% annual revenue growth since 1997, and growing popularity, it is reasonable to argue that McDonald’s operations in India have achieved decent success.
McDonald’s couldn’t have achieved the success without appealing to new generations of consumers— children 3 to 14 and their busy parents’ nurturing needs. In a recent survey by Synovate, a global market research agency, 20% of young Indians between the ages of 8 and 24 reported their preference for McDonald’s products, followed by Pizza Hut (11%) and then KFC (2%).No amount of advertising and brilliant promotions could have done the trick alone. In India, McDonald’s did not create a market where none existed.
It merely responded to an opportunity presented by the changing Indian socio-cultural values and sustained economic liberalization. McDonald’s strategy of positioning itself as a family restaurant with an emphasis on local menus and local values seems to be working well in India. But to what extent McDonald’s can continue its growth in India remains uncertain.
McDonald’s is more than just another American fast food chain. It carries a symbolic load of Americanness—American variant of capitalism and its overwhelming domination over the global economy. It is also a symbol of American cultural imperialism.30 For this reason, McDonald’s operations in India, like other parts of the world, will continue to face opposition from religious fundamentalists, environmentalists, protectionists, animal rights activists, and antiglobalization protestors.
Already, McDonald’s outlets in Delhi and Thane (on the outskirts of Mumbai) have been the targets of violent protests from the Hindu militant groups led by the Shiv Sena (the right-wing Hindu nationalist group) after the company was sued in the United States over the use of beef extract on its French fries. McDonald’s public assurance that it does not use any animal extract in vegetarian foods in India and the clearance certificate the company got from the government agency Brihanmumbai Municipal Corporation (BMC) took the steam out of this kind of politically motivated violent protests
for the time being..