Ukraine War presented McDonald’s only a binary choice: Remain or quit. After deliberations within the corporate management for almost two months they chose the latter. Was it a good or bad business strategy?
Whereas other two American competitive food chains Burger King & KFC decided to stick on, Mac thought otherwise. Citing humanitarian crisis caused by Ukraine war, that did not affect Russian hinterland at all in any case, and forecast of unpredictable business environment that might prevail in near future Mac opted to leave Russia effective May 17, 2022 just about two months into the Russian special military operations.
After 30 years of successful operations and being the market leader in food chain industry in Russia Mac shuttered its doors leaving behind 6,200 employees and 850 venues spread across 62 regions. Mac negotiated with Alex Govor of VKusno i Tochka (meaning “tasty, full stop”) to take over the operations. Although sale price was not indicated Mac continued to pay salaries to the existing employees for a limited period. Taking a one-time write-off loss of about US$ 1.4 Billion Mac has finally done with Russia forever.
Alex Govor is a shrewd business operator. After taking over Mac’s operations he went on re-structuring the food offered rather than cutting down employees. He did one more thing: keeping the channels open with the existing suppliers. He only changed the menu to suit to the Russian plate and using ingredients that are popular amongst customers. Call it re-branding. Understanding between the parties is that Mac menus carry patent fees when used and must be remitted to USA. This did not happen due to the re-branding and the change of menu per se.
The overall result was astounding; within a year of operations Alex Govor succeeded in achieving 500 million meals per annum which stands higher than the quantum reached by the erstwhile trio McDonald’s, Burger King and KFC put together. What is more, Alex Govor is expanding to Bylo Russia and later to Eastern Ukraine where Russia has annexed so far, four oblasts.
The bottom line is Mac failed to distinguish between what is good business strategy and what is bad business strategy. Business strategy has three stages in its making: formulation, execution and evaluation. My guess is that Mac failed in all three stages. Put it the other way. Macdonald’s offered Russian operations cheaply on the plate to Alex Govor!
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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