McDonalds in Russia was a joint Canadian-Russian venture, in which the appointed president was a Russian person. It was done first of all because Russian businessmen know all the specific aspects of doing business in Russia, and second of all in order to show the public that Russians play a major role in this venture. 2. Moscow was chosen for its favorable location and for being the capital-cultural center of Russia, where people are more informed and educated.
3. The opening of the first McDonalds in Russia was greatly advertised and promoted, not only by local media, but also by the biggest national and world media. Many world reporters were invited to the grand-opening of McDonalds so that they could show this event in a favorable way to the company. 4. At the grand opening orphans and children were served first and free. 5.
Many high positioned officials from city and national government, and other celebrities took part in the opening. 6. Despite its foreign belonging McDonalds accepted only national Russian currency, Rubles. Question #2:Identify and describe at least 5 (five) obstacles or problems on a corporate level, and how they were solved and overcome. 1.
Production problems. There was no manufacturer or producer in Russia who could produce products needed for the business. One of the solutions was to bring all the products from different countries, but that would be too expensive, so the management decided to build a huge food processing plant size of 3 football fields in order to produce all needed products under one roof, instead of shipping it from somewhere else. 2. Lack of Trust. At that time (we are talking about the end of Cold War) there was a great lack of trust between Russian and Canadian partners.
That problem had to be overcome by establishing a good and friendly personal relationship between top executives of both sides. 3. Technology problem. Despite its status as a Super- Power, Russia was far behind United States and Canada in technological development. All the equipment for the restaurant had to be brought from outside of the country, even the equipment for the food processing plant. 4.
Political problem. Not every Russian political leader would understand the opening of a representative of not long ago hated “capitalism system” in the heart of Russia. The management had work closely on the McDonalds’ s image in Russia. They had to introduce their restaurant not as a “Capitalism” intruder, but as a business that will serve people’s needs when they are in hurry. 5. No local managers.
There were no local people who could qualify for the manager’s position, so McDonalds had to hire a few Russian men and send them to Canada, where they would learn all necessary skills. 6. Hiring employees. When McDonalds first announced its plans to hire new employees, they started receiving thousands of applications every day. They had to find, select and interview lots of people, in order to hire best possible candidates. 7.
Harsh Russian Winter. As we all know, winter in Russia can be very cold, so McDonalds Corp. had to establish supply of ingredients for their products from the companies, which do not depend on weather conditions. Some of the supplies were produced by local farms, and some had to be imported.
j8. Communicational problems. Despite its size, Moskow did not have any phone books, or business directories, this made it very hard for company to find or locate anything or anybody in capital of Russia. It was also very hard to establish good communication between McDonalds in Moskow and its executives in Canada. 9.
Ingredients problems. Some of the ingredients that McDonalds uses ( such as potatoes) could not be produced by local farmers. Russian potatoes were to big in size, and could not be used to make a french fries. McDonalds had to ship potato seeds from Europe to reproduce them in RussiaQuestion #3Do you believe that McDonalds will succeed in a long term in Moskow?Answer: It has been ten years since McDonalds opened its restaurant in Moskow, and so far it has proved its ability to do a profitable business in Russia.
However, I do not believe that McDonalds will succeed in Moscow in years to come. In order to prove my point of view, I will provide my 5 reason. 1. After August 98 economical crisis in Russia, the population was divided into two groups. One group: about 15 % of population who have enormous amount of money, and another group: people who have almost no money at all. As we know prices in McDonalds compared to Russian standards are fairly expensive, so the majority of people can not afford McDonalds, and those who have money, will not eat at McDonalds because they see it as “junk food” and inexpensive.
2. When McDonalds first opened, it had no competition in this industry, however nowadays it has to compete with many relatively small Russian-oriented fast food restaurants and cafes. These businesses offer Russian food, food that the majority of population is used to and admires. This food is cheaper, healthier and much more tastier than food at McDonalds.
3. Political problems. As we all know, after Kosovo crisis, the United States and Russia have entered a stage of “cold” relations. Mass media has launched a huge propaganda campaign aimed against all American oriented or manufactured products and services. They would like the population to see the United States and its allies as enemies of Russia.
Therefore at this time the number of people who regularly ate at McDonalds decreased drastically. 4. After the crisis, the cost of doing business in Russia was raised by the state and local governments. It was done in order to promote Russian owned and operated businesses, so that the profit will stay in the country.
Foreign and joint ventures such as McDonalds was given unfavorable tax brackets. 5. Nationalism is one of the greatest factors which plays a major role in Russian political life. Every day many political leaders are trying to play with young people’s feelings of patriotism. They are asking the population not to buy or use American products, unfortunately McDonalds falls into this category.
Based on the factors mentioned above, I strongly believe that until economical and political crisis in Russia is not over, McDonalds will be loosing is market share in Russian fast food industry. Unfortunately I can not predict any future changes in the situation in Russia. Stable Russian economy equals stable business for McDonalds. As long as the situation remains unchanged, McDonalds has no clear future.