McDonalds Pakistan Business

McDonalds first opened a store in Pakistan in September 1998. Since then they have opened seventeen new stores through Pakistan. Today millions of Pakistanis place their trust in McDonald's everyday to provide them with food of a very high standard as well as good service. In the past five years, the response to McDonalds coming to Pakistan has been overwhelming. Today Lakson Group Companies has taken over McDonalds Corporation, USA and a local partner making it a 100% owned and operated Pakistani company.

McDonalds located in Pakistan are currently employing about 1,000 Pakistanis and each store is managed by Pakistani managers. They have also contributed in other ways than food service. McDonalds has investment of over Rs 300 crore in the country and payment of taxes and duties amounting to more than Rs 100 crore. Since McDonalds is doing so well in Pakistan they will continue to grow and add more stores in more cities in the future.

In the twenty-first century; international business continues to experience profound changes that will reshape the challenges and opportunities that managers face. The broad, long-term trend is the continued growth of international business, something that will increasingly weave national economies together. This ongoing process of globalization, "ultimately will increase international cooperation and reinforce overall growth" .

In attempting to do business in a country such as Pakistan, a company must go through certain steps, which is seen as a drawback to many companies. This can be a challenging process because there are many steps a company must take. It can take up to six months to get a business off the ground where as in some countries you can start a business within a week. This puts Pakistan at a disadvantage because many companies do not want to wait that long. The cost of doing business in Pakistan is very high. The main Ð''factors' of cost of business in Pakistan are raw material, utilities cost of finance, human resource, technology, infrastructure and supporting institutions. Companies doing business in Pakistan must also register with the Registrar of Companies under the company's ordinance. This can cost anywhere between 200 and 5000 rupees.

The graph below presents, some of the challenges of launching a business in Pakistan are shown below through four measures: procedures required to establish a business, the associated time and cost, and the minimum capital requirement. Entrepreneurs can expect to go through 11 steps to launch a business over 6 months on average, at a cost equal to 36.0% of gross national income (GNI) per capita.

Starting a Business (2004)

Indicator Pakistan Regional

Average OECD

Average

Number of procedures 11 9 6

Time (days) 180 245 32

Cost (% of income per capita) 36.0 45.4 8.0

Min. capital (% of income per capita) 0.0 0.0 44.1

However, the Overseas Private Investment Corporation (OPIC), which supports economic development by promoting U.S. private investments in developing countries and transition economies; can make starting a business in a country such a Pakistan not so tedious after all. OPIC evaluates all projects it may support for their contribution to development in 25 areas, and measures the organizations performance on the basis of the contribution of projects OPIC supports to development. OPIC helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. McDonald's corporation on several occasions has used the support of OPIC to start a restaurant in various countries. OPIC has insured McDonald's up to 90 percent of an eligible investment. OPIC statute generally requires that the investor bear at least 10 percent of the risk of loss. In large corporations such as McDonald's, OPIC frees this large corporation to invest Ð'- at no risk to them. However, when McDonald's decided to expand there business to Pakistan instead on going through OPIC, they went through the Lakson Group of Companies, the leading business house in Pakistan.

Another disadvantage Pakistan faces is the high taxes placed on businesses. Since Pakistan's January 1, 1995 membership into the World Trade Organization there have been very little disputes regarding trade regulations. The World Trade Organization has helped Pakistan become a more competitive and spur additional foreign investment. However, as a result, the tariff rates of electricity for industry and commercial concerns are considerably higher in Pakistan than competing countries basically due to the more than 50 percent of line losses and theft. Businesses are also required to pay innumerable federal, provincial and local taxes under a complex taxation system. It can also take over six months to secure electricity, gas and phone connection. Since the phone service in Pakistan is pretty much mediocre many companies have established their own private service.

Another issue's companies must deal with is the instability of the government at this time. Currently Pakistan is having problem with their President Pervez Musharraf, which is causing some problems. There is also the conflict with Kashmir which could cause U.S. relations to deteriorate and cause statistics for Pakistan to drop dramatically. At this time since Musharraf is backing President Bush in the war on terror the United States is giving a large amount of aid and highly beneficial trade deals to Pakistan.

However, at the same time natives of Pakistan have been extremely pleased to have McDonalds come into their country. They feel it gives them and their children the opportunity to enjoy things at a reasonable price like foreigners do.

Although, the disadvantages of doing business in Pakistan may seem overwhelming, when doing business in Pakistan there are some incentives. Companies who invest in Pakistan can receive numerous tax exemptions. Major exemptions include interest income on foreign currency accounts, capital gains on sales, and many others.

Leading global foodservice retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 119 countries each day; McDonald's is one of the world's most well-known and valuable brands and holds a leading share in the globally branded quick service restaurant segment of the informal eating-out market in virtually every country in which they do business. McDonald's