McDonald’s India Case Study Solution
100 Percent Localization Strategy or Import some Supply Strategy
Localization strategy of using local potatoes for 100 percent using one supplier is a better option for the company to pursue, because it will enable the company to reduce its costs of production, which will assist the company to meet its growth prospectus and increase their earnings by providing cheap price to their customers. Although in the mean time when the company will be pursuing 100 percent localization strategy, it should use multi-tier supplier strategy in order to meet the 100 percent demand till the time when the company will be able to meet 100 percent demand from the adoption of localization strategy. It can be seen in the below table that the profit of McDonalds can be improved considerably if 100% localization of potatoes is considered.
| 100% localization | |
| Selling price per unit | 70 |
| Units sold | 5000 |
| Revenue | 350000 |
| Cost per unit | 40 |
| Variable costs | 200000 |
| Fixed costs | 60000 |
| Profit | 90000 |
| 80% localization | |
| Selling price per unit | 70 |
| Units sold | 5000 |
| Revenue | 350000 |
| Cost per unit | 52 |
| Variable costs | 260000 |
| Fixed costs | 60000 |
| Profit | 30000 |
Vertical Integration
Vertical integration will strengthen the assured supply because if the company is integrated with supplier of potatoes i.e. if McDonalds manages to have its own supplying company of the quality potatoes then it will not have to rely on other suppliers to acquire the desired potatoes. Furthermore, the suppliers usually supply to the number of restaurants, which limits the capacity of McDonalds to acquire the desired potatoes to fulfill the desired demand of the customers by 100 percent through local low cost potatoes, which compels the company to import the potatoes to fulfil the 100 percent demand of the consumers. Hence, the vertical integration will strengthen the McDonalds to strengthen the assured supply............
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