McDonald’s Russia: Managing a Crisis

McDonald’s Russia: Managing a Crisis

The idea of McDonald’s open in Russian is first raised in 1976, the Montreal Olympic Games. When the first McDonald’s restaurant open in Moscow is after 14 years in 1990 with Cohon’s persistent efforts. It achieves big success of Moscow McDonald’s in 1990s and Cohon open another two McDonald’s in Moscow. But during the 1998 Rubles Crisis, the McDonald’s meet big challenges.

(i) What were the changes McDonald’s experienced in Russia?

For open the McDonald’s in Russian, Cohon’s team overcome several problems from capital rationing, operation hurdles, quality control, hiring and training to currency decision in 14 years.

During the Soviet Union, Russian is total different form west country in social manner and lifestyles. Restaurants in Russian are usually two different kind styles, one is formal dining room with rigid design and dining etiquette, one is café where people are stand to drink coffee and eat some desserts. McDonald’s team mass the two kind of dining design for the McDonald restaurant in Russian.

The ownership of McDonald’s Russian is different from it in other country, which the city of Moscow hold 51% ownership and Cohon’s team hold 49% ownership. In order to open the restaurant, Cohon created new supply chain in Russian with different specialist from all over the world. And building the McComplex Plant with $45 million investment to control the quality of every hamburger. In Russian, most soviet employees are dour and unmotivated but McDonald’s most value is cheerful surprisingly employees. Cohon’s team choice the university graduates and training them in Moscow. For the currency decision, Cohon believe rubles will convertible in the future and he insist the McDonald’s in Moscow is a Russian company so think long-term they should accept rubles. Besides, the target customers is Russian people which will be more like use rubles. The decision is verify success in the open day. In marketing of Russian, the McDonald’s use the same menu in New York and do not sell anything to Russian tastes. The price equate to half a day’s salary for average Russian. And they design the largest McDonald’s for Moscow with the picture of some places of interest. The most important is McDonald’s is fair the everyone and no special privileges for anyone. All the efforts mentioned above make the McDonald’s in Moscow get big success and create new record in the open day.

In 1998, the Rubles crisis make McDonald’s face another trouble in price and the menu.

(ii) What do you recommend to McDonald’s for the price decisions? Why?

Raising the prices is inevitable but consider the volumes are down, I think the McDonald’s should keep the price in a level which will cover the cost of operation and use the “Everyday low price” to increase the volumes and price discrimination to courage customers buy the second one. The “Everyday low price” will keep the volume as many as before the price increased, the second one is half price may increase the sales.  And make a discount when customers purchase the combo rather than the single hamburgers.  This is will motivate customers to buy more food at one time. They can also raise the price of different food in different range by the segment customers’ purchase power. For example, the main customers in Russian is young people aged from 20 to 30 years old. They are more powerful than the students and they more like to purchase coffee so the price of coffee increased higher.