McDonalds in Ethiopia

Ethiopia is located on the eastern horn of Africa bordering Sudan, and Kenya. According to their Gross National Income (GNI), Ethiopia is ranked the tenth poorest third world country. Ethiopia’s major cities are comprised of Addis Ababa the capital, Dire Dawa, Harar, and Dessie. Ethiopia is the oldest independent country in Africa and one of the oldest in the world. Unlike most countries in African’s history, Ethiopia has never been colonized, except for during the Italian occupation in 1936-1941. In 1974, the Ethiopian People's Revolutionary Democratic Front (EPRDF) help the country overcome bloody coups, uprisings, wide-scale drought, and massive refugee problems, and establish a socialist state. A new constitution was adopted in 1994, which guaranteed the religious rights and the cultural and political rights of all ethnic groups. Today the country is comprised of more than 80 ethnic groups and as many languages. (Central Intelligence Agency, 2006) This diversity and a major boost in tourism are appealing factors to a business with multicultural capabilities such as McDonalds.

Ethiopia is almost twice the size of Texas and has an estimated population of 74 million. Addis Abab has a population of about 3 million and is the most diverse city in Ethiopia. The Amhara and the Oromo with over 65% constitute the majority of the Ethic groups in Ethiopia with Tigre and Somali being second. Although so many languages are spoken in Ethiopia, English is taught as the major foreign language. Two major religious groups occupy Ethiopia, Muslim and Ethiopian Orthodox, with Muslim being the majority(Central Intelligence Agency, 2006).

Ethiopia is a federal republic which is favorable to a foreign business. In the major cities there are foreign business operating in multiple industries. U.S. fortune 500 companies have found the capital Addis Ababa a strategic location to operations in eastern Africa and southern Europe. Ford, IBM, Boeing, Green Star Food, and MCI are just a few companies with operations in Ethiopia. Ethiopian currency is called the birr and is usually at an exchange rate of about 8.50 per US dollar which is around the same as other countries with the same appealing factors as Ethiopia.

Ethiopia as a whole has been a poverty-stricken economy for decades because of two related factors. Ethiopia’s agricultural sector accounts for over half of the countries GDP. Unfortunately Ethiopia suffers some the world’s worst droughts in history, which in turn destroys their economy. Agriculture produces 60% of exports, and 80% of total employment for the country. Ethiopia’s long time struggle with Eritrea ended in 2000 but with the penalty of losing costal land along the red sea. This along with other poor cultivation practices also has been huge factors to the problem. Coffee is the Ethiopian economies most successful cash crop with exports of some $350 million in 2006. Qat, gold, leather products, live animals, and oilseeds are also exports for Ethiopia (Marcus, 2002).

In 2001, Ethiopia qualified for debt relief from the Highly Indebted Poor Countries (HIPC) initiative. Then in 2005 the International Monetary Fund voted to forgive Ethiopia's debt to the body. Today under Ethiopia's land tenure system, the government owns all land and provides long-term leases to the tenants with favorable factors toward foreign businesses.

In order to develop a McDonalds franchise in Addis Abab, Ethiopia many major factors such as location analysis, market, competition, facilities style, and menu must be considered. McDonalds already has great marketing programs and strategies in place in other foreign markets so the corporation can help with those variables.

McDonalds has an appeal to almost all different cultural backgrounds and walks of life that can be found in Ethiopia. Tourists, who want to eat something they know, will be one half of the target market while the new workforce will be the other half. Tourists feel comfortable in having a restaurant or food source that they know, available to them when they are somewhere they are not use to or comfortable with the native cuisine. New jobs in IT, communications, and other technology fields are booming in Addis Abab and they are hiring domestic and foreign labor (Shimeles, 2005). The lunch break workforce has always been a target market in the U.S. for McDonalds. I believe this can be continued in this market with the same success. The new “fast food” concept will bring new and non-traditional customers to the business also.

Addis Abab has a city area of 204.7 sq mi, filled with tourist attractions, a university, and a plethora of new business domestic and foreign. The location for the McDonalds franchise must be centrally located amongst the targeted market. Since the fast food concept is going to be kind of new to this culture the building location is vital to the business’s success.