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McDonald's on Ice

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I read today that McDonald's has pulled out of Iceland.

The decision to withdraw is a combination of rising costs due to the weak Kronar against the German Mark (all products for McDonad's in Iceland come from Germany) and the inability to hike prices a further 20% to recoup losses. To raise prices would have made the Big Mac in Iceland the most expensive in the world.

For McDonald's, exiting Iceland is not the first time that the corporation has exited a country. Recent examples include Barbados in 1996 and Bolivia in 2002 (among others).

What is interesting to me is that we always expect big brands such as McDonald's to sustain anything that is put in its path both locally and internationally. In this case, the weak Icelandic economy was just too much. The same almost happened to Starbucks when it launched in Vienna, Austria (the coffee capital of the world). In this case, the problem was taking a standardized product and rolling it out internationally without knowing what local reaction would be.

Necessity is the mother of invention and the owner of the McDonald's Franchise in Iceland is going to reopen as Metro - this time, using local produce. What is likely is that by combining the McDonald's system with local tastes could result in some quite interesting innovations. I'm not sure how Starbucks influenced coffee consumption in Vienna or Vienna influenced coffee consumption in Starbucks but Starbucks is still in Vienna and, yet again, I am sure Starbucks had to make some adjustments in order to succeed.

Jenny Darroch is on the faculty at the Drucker School of Management. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com