McDonald’s Russia: Managing a Crisis

McDonald’s Corporation is the world’s major chain of hamburger fast food restaurants,
serving more than 58 million customers every day. The name as well as the hamburgers is
“digested” easily by celebrities or common man. To pursue its endeavors in emerging markets,
McDonald’s stalled its growth in developed nations and leaped in Russia which had emerged as
a major economic force in the world. It was George Cohen, head of McDonald’s Canada, who
started an almost impossible dream of introducing a McDonald’s hamburger in Russia. It took 12
years of efforts and finally in April 1988, he convinced the officials of Moscow that McDonald’s
can be set up in Russian culture. After 14 years of intense negotiations, McDonald’s finally
entered into the Soviet Union on January 31, 1990. This flagship store located in Moscow’s
Pushkin Square, was the world’s largest McDonald’s boasting of 28 cash registers and seating
capacity for around 700 customers. The first day of McDonald’s in Russia broke the record for
inaugural sales in McDonald’s history serving more than 30,000 customers on the first day itself.
Russians were not only impressed by the food, the atmosphere, and the employees, but they were
also impressed by how stringently the company enforced the “rubles only” and “no special
privileges” policies. The Pushkin Square McDonald’s is the world’s busiest McDonald’s
restaurant serving more than 20,000 customers daily. As the fast food market in Russia is
growing rapidly, McDonald’s is trying to expand its presence throughout the country.

In 1998, consumer retail industry in Russia was more than $257.13 million. It was a
multi-genre industry, which included not only restaurants, but also retail sector. At that time,
McDonalds had approximately 20% of the market share. Its major competitors were: Russkoe
Bistro, Rostik’s, Various Mom/Pop restaurants and cooking at home.
 The market was with high inflation and consumers didn’t have enough money, so they
were spending less on non-essential goods and services. McDonalds developed mission and
goals for managing business over the crisis. The company decided to target solo adults and
youth.

The next step was then building a connection with Russian People and familiarize brand.
McDonalds was using different tools for implementing its strategies such as marketing, pricing,
and franchising and menu growth.

There are several challenges that McDonalds faced. The company needed to remain
sustainable in volatile economic conditions. On that time, Russia had an unstable currency
(ruble) and difficult political situation. McDonalds wanted to have long-term growth by adapting
menu and pricing to Russian market. McDonalds developed several alternative action plans. The
company was trying to build connection with Russian people by having affordable prices and
menu expansion according to Russian consumers eating preferences (they added soup, salad,
grilled cheese and pierogi). Moreover, it was opening new locations using franchise, because
Russians were willing to spend money to bring aspects of Western culture to their country. The
company was trying to target new consumer segments. The main purpose was education of the
consumers: McDonalds was showing the menu, information about the brand, status symbol and
charities events. They were promoting the company through different media, such as cartoons
and commercials.
 Furthermore, McDonalds was focusing on profitability, they were raising prices, closing
several stores and targeting only profitable market segments. The mail idea of its action plan was
pushing the product, not brand. The company was trying to promote not McDonald’s, but the
product that is being sold.