PhD Lyudmila Zhebrunova

student Anastasia Suhoradina

student Alika Ionelis

Plekhanov Russian Economic University, Smolensk Branch, Russia, Smolensk

McDonald’s in the Russian market: socio-cultural aspects

Can we now speak about Russia as part of the world economic system and free market? We believe that years of Russia’s integration into the world economic arena have resulted in the creation of environment for development of the free market. Even recession and economic sanctions cannot stop the process. Nowadays there are still more examples of foreign businesses unwilling to leave the profitable Russian market in spite of the sanctions. Trade is one of the still promising fields in the Russian economy – the customer market in Russia is growing and expanding.

Foreign franchising in the country appears alive and intense. For instance, back in 1977 the Soviet Union started talks for bringing into the country of the American fast-food chain – McDonald’s (and that fact can hardly prove the USSR’s inertia and closed nature of economy). Although the first outlet of above fast-food restaurant appeared in our country only in 1990, we cannot state for granted that the USSR did not wish McDonald’s to enter its market. The company itself stated as the reason for its unwillingness to open a restaurant in the USSR the socio-cultural differences between the regimes. The matter is that the brand’s philosophy underlies the concept of employees working on themselves within the company’s team: they are developing and growing up in professionalism. The company then is viewed as a certain start-up point for young people, where they perfect their organizational and personal qualities. So they speak about individualism realized in the team (but not a collective). That certainly contradicted the education policy of the USSR where the concept of collective work and upbringing was at the heart. The Union of the 70-s would have simply adapted the McDonald’s philosophy and changed it into ordinary Soviet fast food cafés – canteens, where you would have been given a burger with vegetables and a beef cutlet.

At the beginning of the 90-s the first McDonald’s restaurant appeared in Moscow. It could be a signal for other western companies that customers in Russia were then ready to appreciate the western type of the culture comprising among other important features the so called “consumer culture” component. Our brief study is to demonstrate that Russia hasn’t only adopted the franchising paradigm offered by McDonald’s and the like, but succeeded in the development of its own model naturalizing some of the best marketing strategies and integrating the cultural component.

In the article we reveal the McDonald’s history and its concept as well as the so called Big Mac Index, a valuable estimation criterion for marketing and macroeconomic research. This fast-food chain is not just a mere way to feed population inexpensively and quickly but a peculiar culture system that underlies the McDonald’s success history.

The company started in 1940 when two brothers Dick and Mack Macdonald opened the first restaurant of a barbecue in San Bernardino, California. In café of that old time there were offered traditionally 25 dishes. The brothers simplified the menu, letting stay in it only hamburgers and cheeseburgers, French fries, pies, chips, coffee and milkshakes. The sharply increased popularity of the restaurant led to numerous conflicts with competitors and in its turn – to problems with personnel hiring. Still the business perfectly progressed as it reflected the austere desires of plain people in the post war world. Having analyzed accounts for several years, the McDonald brothers found out that the main part of their turnover was constituted by hamburgers and made the fatal decision.

In 1948 they closed the restaurant for several months and after opening provided the Speedee Service System which became a prototype of modern fast-food restaurant. The system or the principle consisted of quick servicing, low prices and the greatest possible amounts of a product turnover.

There were no more waitresses, but lots of disposable tableware which did not need to be washed or replaced with the new sets in addition of the gone or broken ones.

But the most important thing was the completely redesigned kitchen of the restaurant where everything was thought over to the trifles with the only single purpose — to increase the products amount to its outmost, having reduced the cooking time and servicing of visitors.

They introduced the system of self-service, once again reduced the range of the offered dishes, remade kitchen to comply with the mass servicing. It allowed to minimize the prices for hamburgers from 30 cents to 15. The kitchen worked by the principle of the assembly line, and on the menu there were only 10 items: hamburger, cheeseburger, three types of soft drinks, milk, coffee, pies, chips and French fries. Soon the income of the brothers exceeded 350 thousand dollars a year.

So, the McDonald brothers created the idea. But the leading role in the world distribution of the McDonald’s company belongs to Ray Krok who laid the foundation to one of the largest companies of the world.

Krok suggested the owners of the brand to sell franchising licenses all over the country for 950 dollars for 20 years. But each café ought to pay a certain percent off the profit which was then shared between the brothers and entrepreneur Krok. The percent was to be paid for the use of the logo, the brand and the system of fast-food invented by the McDonalds. At the time most franchisors were not interested in further brand development and did not monitor the strict observance of all terms of the contract. They were concerned only by money. Krok wanted the story to go the other way. He wanted the restaurant to bring in the fixed income. He refused the sale of licenses on the vast territories, trading the right of opening of only one restaurant. If the owner of a café showed that he could be entrusted by the brand, Ray allowed him to open one more restaurant. He strictly controlled the quality of all purchased products for cooking – they should correspond to standard measures of the McDonald’s company.

Thus in 1955 Ray Krok founded McDonald’s System, Inc. (in 1960 the company was renamed into McDonald’s Corporation). By 1958 McDonald’s sold the 100th millionth hamburger. Ray Krok wanted to build a network of restaurants which would be known for the invariable quality and a universal cooking method. The new motto said: «You are in business for yourself, but not by yourself».

He convinced the franchisees and suppliers of the philosophy — to work not for McDonald’s, but for themselves, together with McDonald’s.

Success of the company is directly connected with this motto. Franchisees follow the basic principles: quality, service, cleanness and availability. The suppliers in their turn accept the high quality standards which the McDonald's company requires.

In 1961 Ray Krok opened the first University of a hamburger at a new restaurant in Elk Grove, Illinois, which allowed the franchisee and operators to study effectively for maintenance and development of McDonald’s success. It is there where they are conducting researches on development of new processed products. By today more than 80 000 people have been trained there. It’s from there where all the McDonald’s philosophy comes into different nations and countries.

The brand is so widely spread and recognized that the influential American journal «The Economist» speaks about the so-called index of Big Mac. It is based on the theory of purchasing power parity according to which a currency rate is to equalize the cost of a consumer goods basket in different countries. But instead of a basket one standard McDonald’s sandwich is taken (it really represents almost every country).

The index of Big Mac is a price of a hamburger in McDonald's chain of restaurants. It includes costs of the premises rent, equipment, labour force and many other factors. If the Big Mac price is low, it is possible to tell that the prices in the country are low, if high – the prices are rather high.

Our article aims not only at demonstrating the accomplishments of the world’s biggest fast food chain but at analyzing the influence of the McDonald’s corporate concept on the Russian environment where it is being installed. Here we may speak about the following.

First, the major requirement for buying the franchise is to preserve and keep ideas and policy of McDonald’s. This guarantees unanimity of the McDonald’s branches all over the world, therefore providing the controlling function of the head office through the concept distribution around the globe, including Russia.

Second, the major idea realized within the company is team work where each employee can and certainly must reveal one’s potential and proceed further, that means the company «gives a start to your gifts and talents». And everything is so very positive. It catches our attention, distinguishes the company in the row of the like where a separately taken employee makes «a cog in the machine». This boosts a person’s self-esteem and contributes to their success orientation so the MacDonald’s company functions as a carrier of the individualism concept all around the globe, including Russia.

Third, the company is targeted to employ young unqualified people and especially students who work part-time to make some extra cash. The choice of labour transmits the MacDonald’s philosophy to the young people who are in their turn are not going to end up their days working in a fast-food restaurant but on receiving their diploma or degree go to form the national professional labour force, defining and directing their country’s way of life. Therefore the McDonald’s ideology is educating, penetrating culture and the society, including Russia.

Still, in spite of the brand’s attractiveness, McDonald’s today has not become uniquely popular in Russia. Moreover, if there are alternatives, customers often prefer different fast-food restaurants. Nowadays fast food is being widely recognized as unhealthy by the media and a lot of young people give up quick meals in favour of «healthy» diet. Young people who are often employed by the chain in Russia appear to be students of professional schools, especially of the corresponding training programmes, and not of the higher educational institutions. There appears to be a variety of similar workplaces besides McDonald’s – more popular, more prestigious. By the way, Russia’s market has offered an optional type of a fast-food restaurant that can be considered an alternative for the ‘hamburger’ cafés. As an example we may list “Domino” chain of cafés which functions in Smolensk, Russia. «The Domino» has made emphasis on the cultural flavour (Russian folk, German «burger» style and so on). Meals here are organized according to the principle of the old good Soviet canteen – you may can buy here soup, appetizer, main course and «compot» (a drink brewed out of fruit)… but with the «German» quality (classic high). So the brand developers managed to piece together McDonald’s fast speed of cooking with the traditions of healthy eating recommended by nutrition specialist as well as high enough cooking quality which is certainly needed to stay competitive.

However, McDonald’s is continuing its victory (?) march across the country. More and more restaurants are being opened in many Russian cities, adding to the economic value of the Big Mac. And the matters concerning the measure of its influence upon the people’s minds can become a subject of a deeper socio-economic analysis.

References

1. http://mcdonalds123.ru/istoriya/istoriya-sozdaniya-kompanii-makdonalds.html

2. http://www.bigmacindex.ru/vse-indeksy-big-maca/2016-01/

3. http://historybrands.jimdo.com/бренды/mcdonald-s/