Managers' Forum ~ Business Case Reviews

 
        "McDonald's is a business, but also a responsible member of the communities it serves.  The joint venture [between Moscow McDonald's and McDonald's Restaurants of Canada] should help foster cooperation between
nations and a better understanding among people.  When individuals from around the world work shoulder-to-shoulder, they learn to communicate, to get along, and to be part of a team.  That's what we call burger diplomacy."  This statement, made by George A. Cohon, vice chairman of Moscow McDonald's
and president and chief executive officer of McDonald's Restaurants of Canada, Limited, explains McDonald's international business philosophy.

        This can be seen in the success story of McDonald's in Moscow.  The January 31, 1990, grand opening of the first McDonald's in Moscow marked the end of more than twelve difficult years of negotiations between Cohon's Canadian team and hundreds of representatives from the Soviet Union.  Hoping to gain entrance to a potential market of 291 million Soviet consumers, McDonald's ultimate selling point was their food technology.  The resulting agreement was a 20 store contract, managed as a 51 to 49 percent joint venture between McDonald's Restaurants of Canada and the Food Service Administration of the Moscow City Council.

        Internationally, McDonald's has a competitive advantage over other fast food chains: it recruits better.  The Moscow location alone received over 25,000 applications.  Stan Stein, senior vice president, HR and labor
relations says that all employees in all countries have the same "ketchup in their veins."  Stein estimates that about 80 percent of McDonald's HR policies are transferable among all countries.  This philosophy that McDonald's is "one big family and cares about its workers lives at work and outside work" had a big influence on its relations with its Russian workers.  The compensation system also played an important role in motivation the
Soviet workforce because wages were substantially higher than the average Soviet wage.

        Technology transfer is evident in McDonald's local suppliers.  Consultants from around the world helped local Soviet farmers employ modern farming techniques in an environment that lagged 15 to 20 years behind the
Western world.  New machinery and technical training allowed the farmers to produce the quality ingredients, like beef, potatoes, onions, milk, and flour, required to maintain McDonald's international standards.  McDonald's
also opened a 10,000-square-meter food production and distribution center which produces hamburger patties, hamburger buns, and pasteurized milk.

        In addition to the food products needed for the new operation, McDonald's in Moscow brought jobs to the local economy.  The first new crew of 630 men and women had completed more than 15,000 hours of skills
development by opening day.  Qualified to manage any McDonald's in the world, the Soviet managers spent more than nine months in North American training programs and graduated from the Canadian Institute of Hamburgerology.  In Russia, McDonald's used its successful HR policies to manage the cultural
differences between a new "western" concept of fast food to develop a successful "Russian" fast food chain.

References:
"Can't Get This Big Without HR Deluxe."  http://www.umi.com/pqdweb?

Czinkota, Michael R., Ilkka A. Ronkainen, and Michael H. Moffett. International Business.  The Dryden Press: 4th edition.  pp. 363 - 366.

McDonald's Frequently Asked Questions - http://www.mcdonalds.com/a_system/faq

"Russia:  Executive Summary."  Country Commercial Guides.  September 24, 1996.

Vikhanski, Oleg S. and Sheila M. Puffer.  "Management Education and Employee Training at Moscow McDonald's." European Management Journal. London: Mar 1993.

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