Reference no: EM132399535

Critical Thinking: Managerial Leadership

McDonald's in India

McDonald's has had significant success in India. In 1996, it opened its first restaurant. Today, it has over 380 restaurants in India. McDonald's has been successful because it adequately examined cultural differences and found ways to address cultural challenges. As mentioned earlier, the practice of Hinduism, the dominant religion in India, results in preferences for vegetarian meals. McDonald's therefore developed many vegetarian menu items while also integrating local foods.

It also recognized the very diverse nature of Indian society and offers appropriate regional and local foods in different regions. To enter the Indian market, McDonald's entered into strategic alliances with two companies that were responsible for different parts of India.45 However, despite the success, McDonald's is currently embroiled in a business war with one of two individuals who helped McDonald's come to India.

In 1996, McDonald's entered into a 50-50 joint venture with Vikram Bakshi of Connaught Place Restaurants Limited. Over the subsequent decades, Bakshi was able to expand McDonald's significantly in the east and north of India. However, in 2008, McDonald's tried to buy back Bakshi's share for $7 million. Bakshi used evidence from an accounting firm to argue that his share was worth $331 million.

In the face of this challenge, McDonald's had Bakshi fired as an alliance partner in 2013. Baskhi has been fighting McDonald's in Indian courts. He sued to be reinstated and to be able to run his stores without interference from McDonald's corporate headquarters. When McDonald's tried to take Bakshi to the London Court of International Arbitration, he was able to get a local Indian court to agree that he was being subjected to "oppression and mismanagement."

Although another court has agreed to allow McDonald's to sue Bakshi in London, he is now appealing in another Indian court. This experience has revealed some of the worst fear of multinationals about the dangers of strategic alliances and the need to respect the local courts.

1. Why did McDonald's choose to use strategic alliances to enter India? Why not use exporting or other means?

2. Why is McDonald's facing challenges in India? What disadvantages of strategic alliances do these challenges reflect?

3. What can McDonald's do to address Bakshi's concerns?

4. What can McDonald's do about Bakshi's use of local Indian courts? How can multinationals adequately prepare for such situations?