INTERNATIONAL BUSINESS STRATEGIES – CHEVRON AND McDONALDS

I’d venture a guess that most readers assume that business practices are pretty-much the same all over – that if you operate your business internationally, you simply operate an American company in a foreign country.

Two recent examples will serve to disprove that assumption.  McDonalds has recently been challenged, business-wise, to be allowed to remain in Russia and do business there.  The current climate in Russia is that anything American is suspect (who can blame them after being scape-goated for 2 years with the Russia collusion stories.)  Thus, McDonalds has determined that they had a choice to make – they could pull out of business operations there (they still see Russia as a growth opportunity), or they could “Go Russia”  – which is what they’ve done.  McDonalds has realized that they should show good faith by sourcing the products sold in their Russian stores, from the country itself.  Thus, the Russian company, Belaya Daca, has been teaching farmers to plant and harvest according to exacting McDonalds’ standards and now supplies all potatoes for the french fries served in Russia.  McDonalds’ delivery trucks bear the standard “98%” to show the share of local suppliers to the restaurants.  Chevron, operating in Venezuela for many years, has another story to tell – one in which they are currently involved in determining whether they’ll leave or stay in Venezuela.  The company was the only U.S. oil firm that weathered the dictatorships of Chavez and, now, Maduro.  They did so by partnering with the nationalized company, PdVSA in 2006 – the entity that took over all oil interests in Venezuela and made them the property of the state.  For several years things worked to the benefit of both Chevron and PdVSA, allowing Chevron to garner about $2.8 billion between 2004 and 2016.  And then Venezuela began to default on their debt payments (a $6 billion default in 2017).  At the same time, oil production has fallen and equipment and repairs needed for the plants has not been forthcoming.  So the question that continues to plague Chevron these days is whether to stay or go – certainly if the company left, the decline in oil production would trigger a collapse of the government’s finances.  These issues tend to make doing business in the U.S. look like child’s play in comparison.

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