For once a sane, sensible interesting discussion on the blog, and I miss it because all the comments went to my spam folder. Oh well. Here's attempting to get this going again.
I think Arvind's points are at first sight reasonable or plausible, but several arguments can be made against them.
The price thing -- I agree with Sajini completely -- Indians are past masters at 'low-cost'. Internationally India is known as an extremely price-sensitive market. In fact we're exporting this strength, see the Nano or perhaps even IT outsourcing. So there is no way McD's is going to come into India and teach us low-cost production. In fact, even in coupling low-cost with hygeine we're learning that ourselves witness all the Sagars and Darshinis in Bangalore (I forget the names of the couple of main Chennai chains that also do the low-cost standardized food thing very well). In fact the way these restaurants have been hiking their prices recently is alarming, if these people are not able to manage their prices, it shows the seriousness of the food crisis.
I think the way the McD's and the rest are going about their business is quite fine. When something as pedestrian (as seen in America or the west) as McD's is a reasonably cool place to be, in India -- it would be stupid of any company not to use the readymade marketing value, which otherwise would take a huge amount of money to create. What is going happen is that over time the coolness value is going to wear off and more and more restaurants are going to open and more and more people are going to be able to afford them, so they'll become like McDs everywhere else. But while people think they're cool, the fast food chains obviously should capitalize on that. The one thing that I think could be dicey is that they're very energy-heavy kind of places for India, and with the coming climate change and energy crunch, I wonder how things will evolve, and will they continue to be able to offer the same kind of experience at a reasonable price.
I don't think McD's sees itself as a provider of low-cost food and serving a useful social function in that sense -- in fact if you want to travel down that path, you would start encountering the dubious ethics of the meat industry and the dubious nutritional aspects of McD's offerings. For example its aggressive marketing at children influences nutritional habits negatively at a young age. The world over, McD's menu is basically the same and you're wishfully hoping that they completely reinvent themselves for India.
The comment about only a small segment of Indians wanting to be cool is breathtakingly stupid-ass. *Everybody* wants to be cool (more or less). The fact is that McD's has a coolness value from being fresh and different and clean and it takes a certain amount of money to provide that experience so only a fraction of the population get to experience it. But as I said, it'll likely become available to more and more over time.
2 comments:
Regarding India s a low cost expert, you are only partially correct. Lower cost of production can happens for two reasons ( a ) wage differentials ( b ) more efficient processes and automation that cut costs ( c ) economies of scale from being large
Right now India is low cost, mainly for reason ( a ) - we are not much of an expert in ( b ) - in general and in particular in restaturants, and in food outlets we dont have any one large to do ( c ). Should someone like McD's start an extensive operation in India they will automatically get ( a ) above. However, McD's will be one of the few with both ( b ) and ( c ). Therefore they can produce at far better prices than anyone else in India can.
You claim that McD's does not see itself as a low cost provider is true only in India and possibly some parts of Asia. In the US they compete mainly on price. I have tried getting breakfast at many small towns/big cities in the US and McD's is by far and away the cheapest and the best value for money.
If you compete based on price in a price sensitive market like you say India is, and do it well, you ae bound to be hugely successful and make more money than competing based on premium prices to attract urban yuppies such as yourself.
McD's need not see itself as an entity that serves a social purpose, like you claim to require. If they see themselves as someone who competes based on price and wants huge market share, they will automatically serve a huge social purpose, by making food more available to a large number of people who will be helped by that. (Does Infosys sees itself as an organisation to serve a social purpose? No. Do they serve a social purpose. Yes.)
I forgot to add that a large fraction of masses in India are concerned about survival and not about being cool and yuppy. So these are people whom McD's can serve - like they do here, Middle America.
Arvind
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