Question

1. What strategy was McDonalds using to set prices in Russia (ethnocentric, polycentric or geocentric pricing)? What are the pros and cons of their approach?
2. Given the economic crisis, what should the company do about its prices? Should they raise them? Why or Why not?
3. Cohon considered whether they should be seeking more creative solutions to bring volume back up “What if we were to take out a bunch of ads on national television and guarantee prices for a certain period of time? For example, what if we were to guarantee that the price of a Big Mac would stay at an advertised rate for the next month?” Is this a good strategy? Why or Why not?

Answer 1

1)McDonald's is using a geocentric pricing strategy in Russia where the subsidiary or associate company will provide all the information and data while the pricing is set by the global corporation. This considers both local as well as global factors into pricing decisions. Pros are that such a pricing strategy involves global supplies and raw material which lessens the cost of products. It takes into accounts local factors such as demographics, income levels, local tastes and preferences. It is easier to develop since Mcdonalds is already a global company. Cons are that people at global corporation level may not understand the local markets and tastes. Supply of global raw material may make the taste different for local peoples.

2)The company should not raise prices as due to the economic crisis, people will stop buying if prices are raised. Since income levels are dwindling, people have already stopped eating outside food. Therefore, to keep the footfalls steady, prices should not be increased.

3)It's not a good strategy since prices don't change that often and a customer won't be enticed by having a fixed price for a few days. Only if a person sees more value in the form of discount or bundled offers will a customer be enticed. Offering much more for same will be a good strategy and can be advertised much more effectively than fixed prices.