Entry of McDonald's Corporation into Communist Controlled Soviet Union and China in 1990~the Cultural Aspect

Introduction

The leitmotif of the modern theory of International Business is that globalization is not simply a trend or a fad but is, rather, an international system. It is the system that has now replaced the old Cold War system, and, like that Cold War system, globalization is directly or indirectly influencing and reshaping the culture of virtually every country in the world. McDonald’s is a powerful emblem of this emerging “global” culture, which is often referred to as the “McDonaldization” of society. Globalization through its espousal of economic integration, digital integration, its ever-widening connectivity of individuals and nations, and spreading of capitalist values is the very anti-thesis of the Soviet culture that was prevalent in the heydays of the Cold War. Prior to its collapse, the Soviet Union had the largest centrally directed economy in the world. The government established its economic priorities through central planning, and administrative decisions rather than the market determined resource allocation and prices. Likewise, Soviet culture was dominated by the government-imposed style of ‘Socialist Realism’, which repressed popular choices and the urge for self-expression. Judged against this backdrop, when McDonald’s opened shop in Pushkin Square, Moscow, on 31st. December 1989, it justifiably became an object of wonder.

McDonald’s entry into the heartlands of communist China was no less wondrous. However the Chinese were more pragmatic in their approach and saw mutual benefit in McDonald’s entry. McDonald’s entry into China coincided with and contributed to a growing synergy between the Chinese cultural value system rooted in Confucianism and Taoism, and Western ideologies

Golden Arches Over Red Square ~ The Soviet Experience

Adjusting to the different elements of local culture is of paramount importance to the success of a company intending to enter a foreign country. Realizing this, McDonald’ s employed the following strategy to ensure that it displayed sensitivity to the cultural mores of the Soviet Union.

· McDonald’s entered Soviet Union through a joint venture (JV) with Moscow City Council and appointed a person of Russian origin as its president. Having a president of Russian origin was smart move on at least two counts:

Ш Soviet Union had an erratic centralized supply doctrine. McDonald’s had to ensure that it would be allocated in the then-Soviet Union central plan, sufficient sugar and flour and other materials. It realized that having a Russian president, with his knowledge of the specific aspects of doing business in the Soviet Union, would circumvent the hassles of a Byzantine government controlled allocation system to a great extent.

Ш Due to the intense rivalry between the United States and the Soviet Union through the Cold War period McDonald’s feared that it would be perceived as the symbol of American invasion of the Soviet way of life. A Russian president conveyed the message to the general public, that Russians play a major role in this venture.

· Despite its foreign belonging McDonalds accepted only national Soviet Russian currency, the Ruble. This helped McDonald’s gain cultural acceptance as the Ruble was inconvertible and the move tied McDonald’s with local suppliers. It established in the minds of the Russians that foreign capital was there to help the ordinary man.

· McDonald’s decided to develop locally. They selected local entrepreneurs and helped them grow their business, in the anticipation that this would reduce the uncertainties of the notorious Soviet supply system. This was move helped McDonald’s gain cultural acceptability as it cemented the McDonald’s brand as a supportive, socially responsible and ultimately, Soviet brand.

· Moscow was chosen as the location of the first McDonald’s shop in the Soviet Union. This was a smart move because private ownership and its rewards were not merely unknown but an anathema to the majority of people in the vast Eurasian stretches beyond the razzmatazz of a few select cities. However, in the capital-cultural center of Russia, people were more informed and receptive towards forces representing globalization. Despite a 13 year long wait to enter the Soviet land, McDonald’s decided to open just one outlet in Moscow, gain cultural acceptance and then expand into other parts of the country.

· The opening of the first McDonalds in Russia was a gala affair. It was greatly advertised and promoted, not only by the local media, but also by the international media. Reporters from many different countries were invited to the grand opening, as were high positioned officials from the city council and the national government. This was an excellently executed