Country risk analysis:

Economical risk: Moderate

In recent few decades GDP has been doubled in India. It is now consistently growing. The
percentage of urban population in India has increased from 21% in 1975 to more than 28% in
2004. It is likely to increase to 36% in 2025. What is important is that the number of low-income
urban households has been approximately halved, from 14.9 million households in 1989-90 to
7.6 million in 2001-02. The number of low-income rural households has also declined from 69
million in 1989-90 to 58 million in 2001-02. The growth in incomes in the top band has been
experienced by both urban and rural households, both of which have roughly doubled as a share
of the total population over the 1990s.

Political risk: High

The government prioritized liberalization and they have interference in the business. After
colonization they were strict about foreign product. Besides political system is not sustainable.

Cultural risk: High

India diversify in culture. They have 83% people do not eat beef or pork. 20% people are
vegetarian. Besides their taste of food and dining habit everything changes with the religion,
locality.
Problems:

Poor transportation

India has poor transportation system. As a result company had to face difficulties to be efficient
in supply chain management.

Inefficient food chain

One of the significant problems of the Indian food industry is an inefficient food chain between
farmers and consumers. About 20% of Indias food production is wasted because of too many
intermediaries, poor infrastructure, and poor transportation facilities.

Mixed culture
India is mixes nation in term of culture. They have 83% people do not eat beef or pork. 20%
people are vegetarian. Besides their taste of food and dining habit everything changes with the
religion, locality.

Issues:

Source of raw materials

Raw materials in India are not supportive. Due to high import duties they cannot go for the
cheapest or best source. They have to manage it from the local areas.

GDP
India has maintained a growing GDP of 7%, but the problem is it stand for the urban area people.
In rural area they have GDP of 2%. As majority of people lives in rural area, a huge customer
segment is overlooked.
Pricing
Since, on an average, each household spends about 50% of income on food and beverages in
India, food prices are always a sensitive issue. Even the Indian middle class, despite their much
improved income level, remains very price sensitive.

Economical factor

India is having a boom in economy. Their GDP has been doubled by few decades. Having a large
number of population makes it attractive for businesses. Top 20% people are responsible for 40%
of national GDP. More over in urban area GDP is (6-8) % and in rural area it is only 2%. In last
20 years they have a huge development in their middle class society. India has availability of
labor in abundance. Using currency as rupee was challenging.

Analysis

Before entering into a market, company must carry out a well conducted market research,
especially in the movement in the economic environment which McDonald had done before
entering the Indian market which is why the company has been able to run the business in the
deviation of shifts in the inflation as well as the fluctuation in the exchange rates.
Recommendation

McDonalds is a powerful brand name. Thus, its strategies seem so good. However, in our
opinion, we still have several recommendations for this company.

1) Market expansion

Being the market leader of Indian fast food industry McDonald has a great opportunity to expand
its market, as it is currently operating only in big cities. They should reach other area as soon as
possible to grab the maximum available customer.

Analysis

Problems

Fund

They need a huge investment to expand their business. This investment has country risk
associated with it.

Market analysis

They need to analyze the market based on location, culture and income level. As Indian people
are price sensitive not every people will found it as a better replacement of traditional food.

Benefits

Revenue
Higher the market, higher the revenue. As the demand is higher than the capacity they can easily
capture the market by expanding its operations.

Employment

Expanding their business will also carry benefit to the economy. It will create a huge
employments.

So, we think they should expand their business aggressively. So they can cover the whole
country within next 5 to 10 years.