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

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

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

4. STRATEGY IN 1990s Growth Strategy Growth Strategy Mc Donalds determined an aggressive growth objective in 1990s. Mc Donalds determined an aggressive growth objective in 1990s. As a result new stores are opened in risky emerging countries. 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. 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. 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. 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. 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 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. 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. 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. 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”: 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 fit the definition of QSR and serve potatoes in their restaurants. Only McDonald’s, Rostik’s, Kroshka-Kartoshka, KFC and Stardogs fit the definition of QSR and serve potatoes in their restaurants. The Russian fast food sector developed very rapidly since the financial crisis of 1998. The Russian fast food sector developed very rapidly since the financial crisis of 1998. McDonald’s and Rostik’s are the most important chains in Moscow and other large cities. McDonald’s and Rostik’s are the most important chains in Moscow and other large cities.

9. McDonald’s in Russia

11. FRANCHISING All the restaurants in Russia are owned by McDonald’s. At this moment there are no franchise restaurants All the restaurants in Russia are owned by McDonald’s. At this moment there are no franchise restaurants Due to restrictions on capital transfer McDonald’s Russia invested all its profits in the property in Russia and established all the restaurants itself Due to restrictions on capital transfer McDonald’s Russia invested all its profits in the property in Russia and established all the restaurants itself McDonald’s is planning to sell some of the restaurants in the future and start franchising its restaurants McDonald’s is planning to sell some of the restaurants in the future and start franchising its restaurants

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

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

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

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

16. SECTOR IN RUSSIA (TRADE) Finnished food producers’ trade with Russia has went through profound changes since the collapse of the Soviet Union. 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. 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.

17. 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. 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. 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. In some product categories (e.g. margarines and other edible fats and meat products) the growth has been only marginal.

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

19. 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. 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. The largest international producers (e.g. Mars) are utilizing their size.

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

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

22. PERFORMANCE IN RUSSIA  McDonald’s was fifth most profitable market in Europe after Britain, France, Germany and Spain.  According to Michael Roberts, president and senior director of McDonald's corporation, financial indicators in Russia and other regions are not given to the public, since number of opened restaurants in the country is comparatively small. But he noticed that according to some recent data, restaurants of McDonald's in Russia are the one of the most successful in the world.

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

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

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

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

27. 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.

28. EVALUATION Political and economical factors affect the performance and strategies of a multinational directly. 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 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. Mc Donald’s learned that investments on the risky economies should be avoided as long as these ecomies proove themselves.