The fast food business in India is growing because large numbers of foreign restaurant chains have entered the Indian market like, McDonald’s, KFC, and Dominos. The fast food industry of India has gained marvelous growth in the past few years and India is the world’s second largest food producer after China. It is expected that total food production will be doubled in the next ten years. Doing business in the fast food industry will be beneficial, but macro environmental factors must be considered like political, economic, legal, and technological.
Political Factors
Political factors play an important role in business operations. India is known as the largest democracy in the world. The political conditions of India affect the commencement of fast food business. Every business entity must comply with the political requirements of that country in which it operates—like minimum wage regulations, anti-discrimination laws, voluntary codes and practices, trade agreements, and taxes. The current Indian government has shown flexibility towards foreign investments and companies with regards to FDI. India is the 4th country that attracts FDI for projects, according to a report by Ernst & Young (Nibbe & Balsara, 2012, p. 4). The 932 projects started in 2011 gave rise to about 255,416 jobs (Nibbe & Balsara, 2012, p. 4). All these economic reforms have facilitated entry into the market of India. After considering the political environment of India, the bureaucracy, and the FDI controls, it is favorable to start a fast food business in the new markets of India.
Economic Factors
Despite the recession and decrease in confidence of consumers in the world, the consumption of fast food has increased (“Good and hungry,” 2010). The fast food industry is growing worldwide due to its convenience and low prices.
The economy of India is growing at a modest rate despite the 2008 recession. It is currently at 7% growth rate compared to its pre-2008 recession rate of 8.5% to 9% (Nibbe & Balsara, 2012, p. 5). The growth level of GDP shows the stable economic growth in the country. The inflation rate was high in 2010 but this is reduced due to government intervention and adjustment by the Central Bank of India (“Inflation,” 2013). The economy of India is developing as an open market and there is economic liberty, less control on foreign trade and investment, deregulation of industries, and privatization (“India,” 2013). The entry of fast food stores is favorable due to big cities in the country—Mumbai, for instance, is known as the financial center of India. Many foreign companies operate here and Bangalore is known throughout the world for its IT Industry and there are many call centers and IT companies in Bangalore. The government of India is striving for poverty eradication, reduction of inflation, and developing infrastructure (“India,” 2013).
Social Factors
Social factors cannot be ignored in the fast food industry because they greatly affect the success of any business. Today consumers are more aware of healthy lifestyles, so they pressure the fast food companies to serve healthier foods on their menu. There is pressure to include low-calorie foods, salads with burgers, and hygienic nutritional food. To do business in India, many things must be kept in mind, like Hindus avoid all foods containing meat (especially beef), eggs, poultry, fish and therefore, strict vegetarians (“Hinduism,” n.d.). In addition, some do not even eat garlic and onions (“Hinduism,” n.d.). Therefore, many fast food stores are offering products which are truly vegetarian like vegetarian pizza and vegetarian burgers to satisfy Hindu consumer that make up 80.5% of the population of India (“India,” 2013).
Competitive Factors
The fast food industry is one of the growing industries in India and the eating trend in India is rapidly changing. The factors which contributed to the success of this industry are disposable income, change in consumer behavior, and demographic change (“India,” 2013). Due to this reason, large numbers of fast food stores have been opening, such as McDonald’s, KFC, Dominos, and Barista. The fast food business will have to face competition not only from local fast food stores but also from other multinational fast food chains. The competition is heavy in Indian fast food industry, as, according to Euromonitor and market research from RNCOS, the fast food industry in India is growing from 25% to 30% a year and the global fast food chains like McDonald’s, KFC, and Pizza Hut are coming to second- and third-tier cities (Overdorf, 2011). In addition, KFC and Pizza Hut are planning to open 1,000 stores and KFC will probably draw $1 billion in revenue over the next four years. Therefore, to cope with this competition there is need of careful planning, strategies, and innovation in fast food products.
Technological Factors
Today is the world of technology and innovation, as the consumers are more familiar with new technology. Therefore, the fast food company has to use channels such as social media websites to attract customers. Fast food companies mostly attract a young population, so games and toys in meals are introduced to attract children and youth. The improvement and innovation in inventory system and supply chain will make the business successful in an international context.
Legal Factors
The legal environment is a very important factor for starting a business in a new country. Before starting a business in a foreign country, the company must consider the attitude of the country towards international business, bureaucracy, political and legal conditions. India is relatively politically stable country. However, the World Bank’s Ease of Doing Business ranking puts India at 132 (“Ease of Doing,” 2013). The country is affected due to corruption and social unrest. The situation of law and regulations is not as good as compared to the Western world. But the good thing is that India is a member of the Geneva Convention, so India has to follow international legal proceedings. There are hurdles in the legal system, but there is the International Center for Alternative Dispute Resolution, which is responsible for resolving international disputes. In addition, the judiciary system in India is not connected with the political system. But a fast food business can face difficulty in copyright and trademark protection, as there is piracy in the country. The government of India is intended to join the Madrid Protocol, which will relax foreign firms. But India is struggling for reforms and the behavior towards foreign companies has changed and this effort will boost FDIs in India.
Political Factors
Political factors play an important role in business operations. India is known as the largest democracy in the world. The political conditions of India affect the commencement of fast food business. Every business entity must comply with the political requirements of that country in which it operates—like minimum wage regulations, anti-discrimination laws, voluntary codes and practices, trade agreements, and taxes. The current Indian government has shown flexibility towards foreign investments and companies with regards to FDI. India is the 4th country that attracts FDI for projects, according to a report by Ernst & Young (Nibbe & Balsara, 2012, p. 4). The 932 projects started in 2011 gave rise to about 255,416 jobs (Nibbe & Balsara, 2012, p. 4). All these economic reforms have facilitated entry into the market of India. After considering the political environment of India, the bureaucracy, and the FDI controls, it is favorable to start a fast food business in the new markets of India.
Economic Factors
Despite the recession and decrease in confidence of consumers in the world, the consumption of fast food has increased (“Good and hungry,” 2010). The fast food industry is growing worldwide due to its convenience and low prices.
The economy of India is growing at a modest rate despite the 2008 recession. It is currently at 7% growth rate compared to its pre-2008 recession rate of 8.5% to 9% (Nibbe & Balsara, 2012, p. 5). The growth level of GDP shows the stable economic growth in the country. The inflation rate was high in 2010 but this is reduced due to government intervention and adjustment by the Central Bank of India (“Inflation,” 2013). The economy of India is developing as an open market and there is economic liberty, less control on foreign trade and investment, deregulation of industries, and privatization (“India,” 2013). The entry of fast food stores is favorable due to big cities in the country—Mumbai, for instance, is known as the financial center of India. Many foreign companies operate here and Bangalore is known throughout the world for its IT Industry and there are many call centers and IT companies in Bangalore. The government of India is striving for poverty eradication, reduction of inflation, and developing infrastructure (“India,” 2013).
Social Factors
Social factors cannot be ignored in the fast food industry because they greatly affect the success of any business. Today consumers are more aware of healthy lifestyles, so they pressure the fast food companies to serve healthier foods on their menu. There is pressure to include low-calorie foods, salads with burgers, and hygienic nutritional food. To do business in India, many things must be kept in mind, like Hindus avoid all foods containing meat (especially beef), eggs, poultry, fish and therefore, strict vegetarians (“Hinduism,” n.d.). In addition, some do not even eat garlic and onions (“Hinduism,” n.d.). Therefore, many fast food stores are offering products which are truly vegetarian like vegetarian pizza and vegetarian burgers to satisfy Hindu consumer that make up 80.5% of the population of India (“India,” 2013).
Competitive Factors
The fast food industry is one of the growing industries in India and the eating trend in India is rapidly changing. The factors which contributed to the success of this industry are disposable income, change in consumer behavior, and demographic change (“India,” 2013). Due to this reason, large numbers of fast food stores have been opening, such as McDonald’s, KFC, Dominos, and Barista. The fast food business will have to face competition not only from local fast food stores but also from other multinational fast food chains. The competition is heavy in Indian fast food industry, as, according to Euromonitor and market research from RNCOS, the fast food industry in India is growing from 25% to 30% a year and the global fast food chains like McDonald’s, KFC, and Pizza Hut are coming to second- and third-tier cities (Overdorf, 2011). In addition, KFC and Pizza Hut are planning to open 1,000 stores and KFC will probably draw $1 billion in revenue over the next four years. Therefore, to cope with this competition there is need of careful planning, strategies, and innovation in fast food products.
Technological Factors
Today is the world of technology and innovation, as the consumers are more familiar with new technology. Therefore, the fast food company has to use channels such as social media websites to attract customers. Fast food companies mostly attract a young population, so games and toys in meals are introduced to attract children and youth. The improvement and innovation in inventory system and supply chain will make the business successful in an international context.
Legal Factors
The legal environment is a very important factor for starting a business in a new country. Before starting a business in a foreign country, the company must consider the attitude of the country towards international business, bureaucracy, political and legal conditions. India is relatively politically stable country. However, the World Bank’s Ease of Doing Business ranking puts India at 132 (“Ease of Doing,” 2013). The country is affected due to corruption and social unrest. The situation of law and regulations is not as good as compared to the Western world. But the good thing is that India is a member of the Geneva Convention, so India has to follow international legal proceedings. There are hurdles in the legal system, but there is the International Center for Alternative Dispute Resolution, which is responsible for resolving international disputes. In addition, the judiciary system in India is not connected with the political system. But a fast food business can face difficulty in copyright and trademark protection, as there is piracy in the country. The government of India is intended to join the Madrid Protocol, which will relax foreign firms. But India is struggling for reforms and the behavior towards foreign companies has changed and this effort will boost FDIs in India.