The Marketing Environment

The Marketing Environment

Economic Environment:

The economic situation at the time McDonald’s was entering Russia was difficult. The narrator in the video explains that people had to queue in long lines for food and consumer goods, which were short in supply. The country was in the process of transitioning to a free-market economy where people would be free to spend their money, and it had started entering into joint ventures with the west in the hope that the ventures would speed up the transition. Citizens were looking forward to the economic reforms that were yet to come. This, in my opinion, was an opportunity for McDonald’s.

Technological Environment (including Infrastructure):

The technological environment in Russia at the time was not very good.  As the narrator explains, most businesses in Russia in 1988 were still doing their transactions manually. The general director of the joint venture between the Soviet Union and McDonald’s – who was charged with getting the office up and running, faced a number of challenges, such as having to wait for about six months to get one international telephone line. This was a threat to McDonald’s.

Cultural Environment:

The cultural environment in Russia also posed a lot of challenges to McDonald’s. The culture of negotiation in Russia, for instance, differs greatly from that of the west because of the time it takes to complete a deal. The narrator in the video, for instance, explains that when the Senior Chairman of McDonald’s Canada began negations in 1976 with the Soviet Union about opening the first McDonald’s in Moscow, the negotiation took over 12 years to complete. The manager explains in the video that negotiating with the Russians was very frustrating because Russian negotiators can change at any time without notice. It is also the culture of the Russians not to volunteer any communication during negotiations, a behavior that baffles the westerners who believe in information sharing during negotiation in the spirit of finding mutual solutions. This was a threat to McDonald’s.

Political/Legal Environment:

The early 1980s in Russia marked the beginning of the glasnost era, and the Russians united to bring about a market economy. At around 1985, the idea of perestroika was introduced for liberalization and opening the market. This was followed by the Kremlin passing new laws on joint ventures. I would say that the political environment at the time was an opportunity for McDonald’s.

Natural Environment:

The natural environment in Russia was also positive for McDonald’s because the company was able to get most of the food supplies that it would use to make the quality of foods that McDonald’s is known for globally. While almost everything was available locally, some varieties, such as the potatoes for making the best French fries, were not available. However, the soil in Russia was good; hence McDonald’s could plant its own potatoes. An agronomist was shipped from Holland to help with the problem. Potato seeds were then imported from Holland, and were planted on Russian soil.  While the lack of right potatoes may have posed a challenge, I think the fact that potatoes could be shipped and planted in Russia was an opportunity for McDonald’s.

Other (optional):

The positioning of the site chosen for the McDonald’s construction, however, posed some challenges to them because foreign contractors were not allowed to work there.  This means that the McDonald’s had to be extensively involved in negotiations with the Russians to get non-Russian contractors to the site.  This was a threat to the food company.

References

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