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Mc Donald’s Corporation in Emerging Markets

Mc Donald’s Corporation in Emerging Markets. Aslı İzgi Cenker Kavaklı Esra Tatlı Emre Er. STRATEGY IN 1990s. Political Environment In 1990 USSR collapsed. Two polar international system switched to one. US firms could have the chance to enter the ex soviet countries. STRATEGY IN 1990s.

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Mc Donald’s Corporation in Emerging Markets

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  1. Mc Donald’s Corporation in Emerging Markets Aslı İzgi Cenker Kavaklı Esra Tatlı Emre Er

  2. STRATEGY IN 1990s • Political Environment • In 1990 USSR collapsed. • Two polar international system switched to one. • US firms could have the chance to enter the ex soviet countries.

  3. STRATEGY IN 1990s • Economic Environment • The World in 1990s grew at a higher rate. • New emerging economies could have the funds to grow.

  4. STRATEGY IN 1990s • Growth Strategy • Mc Donalds determined an aggressive growth objective in 1990s. • As a result new stores are opened in risky emerging countries.

  5. SYSYEM CHANGE IN RUSSIA • In 1987 ,Russia embarked on the path of ambitious economic reform under the USSR government. • Economic reform in foreign commerce, business permitted to trade directly, ending the state's historic monopoly. • Prices were freed and sustainable attempts were made to reduce government spending, restrain growth in the money supply, and stabilize the ruble. • Political resistance in the parliament and conflict over spending of the Central Bank undermined the effectiveness of these measures, and the lack of clear direction on the government's part continues to hamper reform.

  6. SYSTEM CHANGE IN RUSSIA • By early 1994, over 20 percent of all workers and 40 percent of workers in manufacturing were employed in privatized companies. • By June 30, 1994, 70 percent of all industrial enterprises in Russia were privatized. • The private and cooperative sector's share of employment is rising. • When prices were freed in 1992, the concentration of production in the hands of monopoly producers produced major price surges.

  7. FOOD SERVICE IN RUSSIA • The Russian restaurant market consists of several target markets, each of which is different in terms of total food sales and the number of “players”: • Fast food, which is divided into two separate segments: street/mobile fastfood. (kiosks, stalls, carts, etc.) and walk-in/sit-down fast-food outlets • “Democratic” restaurants – moderately priced outlets • “Boutique” restaurants – higher priced/exclusive outlets • Coffee shops

  8. FOOD SERVICE IN RUSSIA (cont.) • Only McDonald’s, Rostik’s, Kroshka-Kartoshka, KFC and Stardogs fitthe definition of QSR and serve potatoes in their restaurants. • The Russian fast food sector developed very rapidly since thefinancial crisis of 1998. • McDonald’s and Rostik’s are the most important chains in Moscowand other large cities.

  9. McDonald’s in Russia

  10. FRANCHISING • All the restaurants in Russia are owned by McDonald’s. At thismoment there are no franchise restaurants • Due to restrictions on capital transfer McDonald’s Russiainvested all its profits in the property in Russia and establishedall the restaurants itself • McDonald’s is planning to sell some of the restaurants in thefuture and start franchising its restaurants

  11. SECTOR IN RUSSIA(SUPPLIERS) • Supply of materials has been a problem for Mc Donalds in Russia because: • There was lack of materials in the economy. • Some materials even did not exist in Russia. • Regulations prevented Mc Donald’s to buy materials from the market freely.

  12. SECTOR IN RUSSIA(SUPPLIERS) • Mc Complex • is the food processing and distribution center of Mc Donalds in Russia. • employs more than 500 people to supply local foods to the McDonalds in Russian restaurants and 21 other countries including Belarus.

  13. SECTOR IN RUSSIA(SUPPLIERS) • Potato suppliers • Over xxx% of raw ingredients needed for McDonald's Russianrestaurants are purchased from more than 100 independent Russianand C.I.S suppliers who follow McDonald's strictly controlled qualitystandards in their food processing operations. • The company informed us that their current supplier of all potatoproducts is McCain and that potatoes are coming from Holland • Other product suppliers are: • "Pensensky Myasopticekombinat” is a supplier of high quality beef for McDonald’s in Russia. • “Moscowsky Kombinat Chleboproduktov” is a supplier of flour forMcDonald’s. • Agricultural firm “Belaya Dacha” • • is a supplier of high quality vegetables for McDonald's in Russia. The cooperation between McDonald’s and “Belaya Dacha” began in 1990.

  14. SECTOR IN RUSSIA(SUPPLIERS) • Decision making unit • Mr. Pavel Karataev is responsible for buying potatoes. Tel: (7-095) 755-6600 • They use a central buying policy. • At the beginning of this year the head of McDonald’s in Russiaannounced that at that moment the company was innegotiations with leading world producers of potatoes to starttheir own production in Russia. • A couple of week later McCain announced that they are planningto open a potato processing plant in Nizhniy Novgorod. • McCain has also plans to open a plant in Tyumen Region

  15. SECTOR IN RUSSIA(TRADE) • Finnished food producers’ trade with Russia has went through profound changes since the collapse of the Soviet Union. • Food trade in Russia after the collapse of the Soviet Union – as well as many other things – can be divided into two parts separated by the financial crisis of 1998.

  16. SECTOR IN RUSSIA(TRADE) • Before the 1998 financial crisis, level of imports of foreign foodstuffs was high in Russia due to strong rouble and lack of local products of good quality. • The exports of Finnished foodstuffs to Russia have been recovering in recent years, but no product category has reached its pre-crisis export level. • In some product categories (e.g. margarines and other edible fats and meat products) the growth has been only marginal.

  17. SECTOR IN RUSSIA(RETAILING) • The majority of foodstuff retail is still conducted via unorganised forms of trade. • The retail chains are trying to shorten the distribution chain, similarly to what has been seen in the Western countries.

  18. SECTOR IN RUSSIA(COMPETITORS) • In the food production sector the competition is fierce, as large Russian and foreign producers want to ensure their piece of the huge market. • The largest international producers (e.g. Mars) are utilizing their size.

  19. PERFORMANCE IN RUSSIA • The position of the 3 international and 2 largest local QSR organisations in Russia are presented in the table below:

  20. PERFORMANCE IN RUSSIA • Financial performance • Russia is now one of McDonald's fastest-growing markets, alongwith Western Europe and China. • Real estate analysts and industry experts conservatively value. • McDonald's 103 Russian restaurants, plus its land, storagewarehouses and distribution centres at $xxx million. • Revenue in Russia in 2005 totalled $310 million. • McDonald's Corp sales rose 18 percent in Russia in 2004 but areseen slowing in 2005, the company's president for Europe, RussSmyth, said.

  21. PERFORMANCE IN RUSSIA • McDonald’s was fifth most profitable market in Europe afterBritain, France, Germany and Spain. • According to Michael Roberts, president and senior director ofMcDonald's corporation, financial indicators in Russia and otherregions are not given to the public, since number of openedrestaurants in the country is comparatively small. But henoticed that according to some recent data, restaurants ofMcDonald's in Russia are the one of the most successful in theworld.

  22. PERFORMANCE IN RUSSIA • Today Mc Donalds has: • 17,000 employees • 127 restaurants in 37 Russian cities • 500,000 customers daily • more than $310 million annual sales. • 83% of Russian fast food market

  23. PERFORMANCE IN RUSSIA • Mc Donalds plans to open; • 25 restaurants in 2005 • 35 restaurants in 2006 • 45 restaurants in 2007

  24. CHINA • In 1990 Mc Donalds entered to the Chinese Market. • Sector • Catering industry grew 20% in 1990s in China • Economic Environment • Despite the Asian financial crisis in 1997, Chinese economy continued to grow. • Political Environment • Chinese government considered the catering industry as a new economic growth sector.

  25. CHINA • Growth Strategy • In the first six months of 2001, 96 restaurants are opened. • Between 2003 and 2013, 100 restaurants are opened each year in China.

  26. STRATEGY CHANGE IN 2001 • Economic Environment by 2001 • Strong Dollar • Developing countries in Asia and Latin America are in crisis. • New Strategy • Mc Donalds forced to close down 163 unproductive stores. • Stable economies are preferred for new investments. 60% of new investments are made in USA, Canada and Europe.

  27. EVALUATION • Political and economical factors affect the performance and strategies of a multinational directly. • Mc Donald’s used the good conditions of 1990s in order to grow at a higher rate. • Mc Donald’s learned that investments on the risky economies should be avoided as long as these ecomies proove themselves.

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