McDonald’s is a world-renown brand of food restaurants that is famous for its low prices, high accessibility, and several new trends in its industry. It has spread across almost all countries through joint ventures with local business entities, creating a massive network of interconnected supply chains. However, the company has met many obstacles on its way to set up in some the countries, such as India. The article “Joint ventures in India: Learning from McDonald’s experience” by Bradley Dunseith explains its most recent struggles. This paper will summarize the article and discuss what challenges were set for the company.
The story of McDonald’s India began almost thirty years ago. This type of branching is essential for McDonald’s due to the greater availability of integration within the local culture. As a restaurant that excels at selling burgers made with beef meat, it met with many challenges in the Indian market (Dunseith, 2017). To gain a more accessible entry into this local industry, the firm signed two joint ventures: with Vikram Bakshi from Connaught Plaza Restaurants Private Limited (CPRL) and with Amit Jatia from Hard Castle Restaurants (HCR) (Dunseith, 2017). While the deal with HCR was smooth, Bakshi began acting irrationally over time, even getting accused of financial machinations (Dunseith, 2017). It was apparent that this partnership would cause more trouble in the future.
Being unable to resolve the situation in time, McDonald’s suffered great losses from it. In early 2017, Bakshi made concerning statements regarding health regulations in his own restaurants, damaging McDonald’s reputation in India (Dunseith, 2017). There was the need to act upon the removal of this partner, yet this venture continued on. Dunseth (2017) writes that “in July 2017, 43 McDonald’s outlets in Delhi closed overnight for failure to renew regulatory health licenses.” This setback was met with many concerns over the brand image and future disputes that will continue to damage it.
In the end, the casualties from this conflict were immense. Bakshi, who was barely agreeable from the beginning, began making decisions on behalf of an entire company, leading to severe financial losses while refusing to sell his portion of the stock (Dunseith, 2017). After deliberation, McDonald’s decided to shut down all 169 restaurants owned by CPRL under its brand name, leading to the loss of thousands of jobs (Dunseith, 2017). The actions of Bakshi also led to the weakened position of the company in the Indian market, as it gave its first place among food chains to Domino’s Pizza in this region (ET Online, 2019). McDonald’s took several attempts to make a deal with the co-owner of CPRL, yet none had any success.
Such legal action could have been forced through Indian court hearings, yet there was an issue as well. Therefore, Bakshi’s reign, alongside with overall governmental support that he received from India’s National Company Law Tribunal, put the company at the risk of leaving such a vast market to its competitors (Dunseith, 2017). To cut its losses, the company was set on the premature termination of this joint venture (Dunseith, 2017). One of the toughest challenges for the company was making a drastic decision regarding this case since it was apparent that its interests in Bakshi did not align with McDonald’s.
As has been demonstrated, this joint venture was a disaster for McDonald’s, leading to great financial losses, tarnished reputation, and giving up its competitive position. Since the article leaves the case unresolved, it will be necessary to examine the most recent events within the company’s structure to overview the outcomes of this venture. After many conflicts with the owner of the second half of CPRL stock, McDonald’s was able to acquire full ownership over its Indian partner in 2019 (ET Online, 2019).
The company made it difficult for CPRL to continue arguing by openly seeking new partners in India and even revealing two potential candidates just before Bakshi finally seceded (ET Online, 2019). McDonald’s efforts were fruitful, but they took an inadequate amount of time and input compared with a simple, thorough check of joint venture partners.
In conclusion, McDonald’s in India met several obstacles that significantly decreased its profitability in the past twenty-five years. The article shows how the actions of a single partner that was chosen without proper vetting can lead not only to missed opportunities but lost profits counting in millions of dollars. Each joint venture presents a unique challenge for a company and requires a thorough analysis of the benefits and disadvantages.
The example of McDonald’s shows what struggles can await in the case of misplaced trust and the lack of support from the local lawmakers. However, the company is on its way to resolving the remaining troubles linked with the previous split of its stakes in CPRL. The removal of Bakshi from this partnership is essential on the way towards the restoration of McDonald’s reputation as the number one food restaurant chain in India. Joint ventures are an essential tool for business expansion and bring high risks along with high rewards.
Dunseith, B. (2018). Joint ventures in India: Learning from McDonald’s experience. India Briefing News. Web.
ET Online. (2019). Vikram Bakshi is finally out, and McDonald’s India is Lovin’ it. The Economic Times. Web.