CASE STUDY ANALYSIS 2

MacFries are McDonald’s trademark product and the case details the challenges in
introducing MacFries in India by McDonald’s. The case highlights the challenges of food
companies in emerging economies, given import restrictions, small scale farming and
poor infrastructure. The case presents strategies for optimizing the supply chain in fast
growth, low cost environment.The case also addresses approaches to value chain
development.

1. What were the pitfalls of the initial attempts by McDonald’s India to create its French
Fry supply chain? What were the critical factors that enabled McCain’s success? (6
points)

Pitfalls faced by McDonalds

The first and major pitfall was that potatoes were tough to be locally sourced and
importing was not reliable due to high cost and availability reasons. Even though India
was 3rd largest potato producer, less than 1% were process grade for french fries and
didnt have ideal potato growing and storage conditions.logistics and distribution was not
developed as well. To keep in line with their philosophy, McDonalds didn't want to
import frozen products, also because of high import duties and long procedures.

India allows growing only in winters and is too short a period. Outdated farming and
irrigation practices reduced the yield too. Water and electricity was wasted through
those practices.

Pitfall faced by McCain

Since the Indian Government strictly didn't allow import of raw potatoes, they had to
bring in potato germplasm. Mccain continued to import frozen fries at high cost to keep
up with Indian market requirements. Through research potatoes were supposed to be
best grown in high altitudes. So McCain had to start farming in the himalayas. Due to
heavy snow , transportation was difficult. It was transported down from mountains by
donkeys. So himalayas couldn't be a suitable accessible location for potato growing.
Due to lack of technology, McCain had to bring in equipment to india. Because they
couldn't invest in a market without knowing if there will be profit.

The most critical factor that McCains success was their locally procured potatoes. That
which inturn cut the import cost to very low. McCain spent many years working on
potato agronomy doing extensive research of India 's climate , seed quality , and potato
specification , which includes solidity , moisture , and sugar level in the potato and with
farmers to develop this supply chain. The development and training of farmers-real time
demonstrations , and directors who were able to come up with novel irrigation and
agricultural concepts , also resulted in efficiency and the high - quality potatoes. Potato
sprout suppressant and cold storage facilities is also another factor for success.

2. How did farmer collaboration and capability building help promote McDonald’s growth
and quality objectives? (6 points)

It helped to identify the best combination of growing practices and storage conditions.
New techniques helped farmers to increase yield(30-40%),utilize space better and
reduce water consumption. The potato sprout suppressant application with controlled
temperature storage helped to avoid deterioration in potato quality.

In 2010, McDonalds India Supply that was manufactured locally increased to 75% from
30%in 2008. It also had a 30%lower cost structure by saving 19% in import cost. It also
reduced inventory time to half and reduced shipping time. Diverse supply base gave
them secured supply. Due to more locally procured potatoes, McDonalds fries cost
declined. It expanded the business and menu by adding Extra value meals at low
prices. This inturn attracted more customers and promoted mcdonalds as an affordable
meal destination. It also increased average spend per visit , thus increasing profit

McDonald's helps its suppliers grow their own capacity so that they can produce more
food for McDonald's to sell in stores. This allows for more efficient use of resources and
leads to more profit for both parties involved.

In addition to helping farmers improve their own capacities, McDonald's also works with
them on a regular basis so that they can deliver products that meet standards set by
McDonald's itself. This means not only ensuring quality control but also making sure
that production runs smoothly enough that there is no excess waste or loss during
transportation or distribution processes without increasing the environmental footprint.

Farmers' growth was supported by the following factors:guaranteed sales of farm

3. Under McCain’s management, the MacFry supply chain has been effective. What are
the risks of this model? How can McDonald’s address the competitive threats from other
firms moving in and capitalizing on the large investments of time and money that
McDonald’s has made? (6 points)

India has a tropical weather/climate. Already indian potato growing is only during a short
period in winter. Climate change along with global warming issues can affect the
national supply chain. India is also prone to natural disasters like floods so that can also
disrupt supply chains.
Solutions to address competitive threat
a) Focus on quality and getting everything right always as usual
In order to maintain its competition, McDonald has to focus on the quality of their food
since it has generally been recognised for its excellent quality standards. The business
should keep a close eye on the quality and safety of the ingredients it uses.

b) By incentivizing farmers more than other businesses.

c) earn their contract and patent your technologies and methods because they did
something which was said to be impossible by others.

d)Improve brand image by providing healthier options like baked potato strips.
Fast-food is usually seen as junk food culture, so moving toward healthier and more
customized options to their customers will give you a competitive advantage.

e)Offer discounts like their initial extra value meal.

4. What are the options McDonald’s India can pursue to meet the huge growth in
demand that has been predicted in India? Is it better to push for 100% localization using
one supplier or to use a multi supplier strategy by continuing to import some supply? (6
points)

It should enhance local production in order to retain low costs and protect itself from
exchange rate volatility . So it should push for 100% localization as much as possible .
Also because it's their global motto to produce raw materials 100% locally, this will help
to keep up the brand name and true values. Using more farmers will give them
bargaining power.

They should also find more places suitable to grow potatoes for the expanding business
other than Gujarat.

5. Would vertical integration* strengthen McDonald’s ability to have assured supply or

YES

It would achieve quality requirements and ensure supply quantity because all the
farmers are using their techniques to grow the process grade potatoes.

With rising import costs and limited storage space , increasing local potato production
and storage is beneficial .

Vertical integration can effectively address a lack of quality food processing providers
and inadequate warehousing facilities .

Diverse supply base gave them secured supply.Long - standing partnerships with
farmers have helped McDonald 's maintain production amid the recession Having a
control over the suppliers supply chain would be helpful in reducing the costs