McDonald’s In IndiaM. Noman Bari

Strategies Covered in Case• Corporate Strategy

• Challenges• Attractiveness• Country Business Strategy• SCM • CSR

• Marketing Strategy• Branding, • Pricing, • Promotion, • Distribution

Strategy to Enter in Indian• Wholly owned subsidiary- MIPL

• Incorporated in 1993

• McDonald's opened its doors in India in Vasant

Vihar, New Delhi in October 1996

• Entered into two 50:50 JVs with Connaught Plaza

Restaurants-Vikram Bakshi- North & Hardcastle

Restaurants-Amit Jatia- West

• Local Indian employees in all kind of positions and

trained extensively, along with their Indian

management team.

Indian Market• Size of ‘Eating Out’ market- substantial

• India’s food expenditure- $77 Bn / world $ 4000 Bn

(2%)

• Highly fragmented food market

• Millions of roadside stalls / carts- major market

share

• Udipi, Sandwich, PavBhaji, Chaats, Chinese,

Namkeens, Pizza

• Organised chains- Narula’s, Wimpys, Udipis

Corporate Strategies

ChallengesEconomic Liberalization•Entry & Exits in sectors is controlled by Govt•MNC restrictions•Deregulation since 1991 but socialist / swadeshi mindset continues (Preference for national products)•MPs comment on MNC in consumer sector“We want computer chips, not potato chips”

Pressure Groups•Anti- Western / MNC factions•Health activists•Environmentalists•Animal welfare activists•Sons of the soil campaigners

ChallengesExisting Food Chains•KFC•Pizza Hut

Menu Development

•Religious sensibilities of Indian Consumers• Beef not consumed by Hindus• Pork not consumed by Muslim

•75% localized menu & 25% international menu• Mutton based “Maharaja Mac• McAloo Tikkt Burger, Pizza McPuff, McVeggie etc

•Low entry level prices

Attractiveness• Huge Sub-continent

• 4 times the population of the US

• Middle Class estimated at 300 Million

• Per Capita GDP $ 400- but at PPP- $2540

• 4th largest economy- ahead of France, Russia,UK,

Asia’s 3rd largest-Behind China & Japan (PPP)

• Eating out sector growing, consumer spend increasing

• Rs 40000 Cr eating out market growing @ 6%

• Rs 1500 Cr urban fast food segment growing @ 20%

Country Business Strategy• Only < 10% population- possible target market • “We want to first concentrate on metros, then open

branches in other cities. We want to set up outlets only in cities where we can ensure the quality of products” Vikram Bakshi

Phase I- • Focus on cities of relatively high incomes where citizens

are exposed to western food & culturePhase II- • Move to smaller satellite towns (Gurgaon, Pune)- Positive

spillover effect of reputation• Jaipur & Agra- To attract foreign touristsPhase III- • Malls, Multiplexes, Highways, Stations & Airports• No plans for South, East, Goa?

Supply Chain Management (SCM)

• Critical for success• Local network for supply chain & distribution• Local suppliers, distributors to match international

quality • Operations & training to match international quality and

hygiene standards• By 2000- Investment in supply chain – Rs 300 Crore

Local Sourcing: • Focus on cities of relatively high incomes where citizens

are exposed to western food & culture• Buns from North• Chicken & Cheese from West• Fish, Lettuce & Pickles from South• 98% paper, locally sourced• French fries imported from Indonesia• 40 suppliers in the chain

Corporate Social Responsibility CSR

• Children’s painting competition across cities

• Maintaining gardens, parks, heritage structures

• Effluent treatments, Pulse Polio, recyclable paper bags

• ‘Litter Patrols’ to ensure a cleaner neighbourhood.

• Huge donations to Latur/ Bhuj / Gujarat earthquakes

• Co-Sponsor of Inter-School Science Quiz Competition.

• 2002, tie up with Nalanda Foundation - education of the

underprivileged Girl-Child.

Marketing Strategies

Leadership Marketing• Reconnect with customers thro’ contemporary global

marketing direction “i'm lovin' it”

• “i'm lovin' it” reflects an attitude we want our

employees to embrace & reflect in their service

• Maximize ad spend impact

• Broaden reach through PR

• Deliver global brand message through ads, packaging

and restaurant experiences

• Emphasis on building sales at existing restaurants

rather than adding new ones.

Marketing Strategy• Promotional strategy to convey world class xp,

Indian adaptations, freshness, nutrition & value• Shift from worldwide positioning of drive-in

convenience and speedy service• Segment- The Young family (<30 years)• Target- The young family who eats out • Focus- Attracting children, so family follows• Positioning- ‘McDonalds mein hai kuch baat’ –

a place for the entire family to enjoy• Differentiation- highlighting brand, food & variety • Happy meal film on Cartoon Network, Zee Tv• Special promotions during festivals

Cost Control / Pricing Strategy• “Customers attracted purely by these

unsustainable but attractive low prices would not pay repeat visits”

• Development of a low cost supply chain – crucial enabling factor

Brand Food Price

KFCBurger/KFC, Drink Rs 59 – 79

Chicken, rice, gravy meal Rs 39

Pizza Hut2 medium pizzas, Pepsi Rs 350

Wimpys- Mega meals starting Rs 39

McDonald

Value meals Rs 39

Quick bites Rs 25

Soft serve ice creams Rs 8

Promotion Strategy• Collaboration with Coke, MTV, Hungama.com, Sony Music & GM

• Scratch cards on Large combo meals

• Prizes- caps, tshirts, CDs, internet cards, free tickets to a Lucky Ali contest

• Purchase of a 2nd meal in a month qualifies for- Opel Corsa / NZ trip

• Snags- Neither Lucky Ali contest materialised nor Corsa nor NZ trip- issues of credibility

Distribution Strategy• 2 centralised distribution centers at Mumbai & Kochi, each capable of catering to 25 outlets • Aim to enhance quality of storage operations• Emphasis on economies of scale-storage volumes high• QIP (Quality Inspection Program)- Quality checks at 20 points in the supply chain movement• HACCP (Hazard Analysis Critical Control Point) Food safety standards emphasizing prevention

of faults than detection thro inspection• AFL logistics- 50:50 JV between AirFreight & FX Coughlin of USA- McDonalds international

logistics partner

Growth Strategies

Growth Strategy• Increasing seating capacity• Adding Birthday party areas• Restaurant type setup & provide lounge for senior citizen• Other innovation to attract customers of al ages• Enter new ‘A’ cities- Ludhiana, Ahmedabad, Baroda- lower spending power , population density• ISBT terminal Delhi• Airport & Railway station- Mumbai & Jaipur• Highways & Petrol Pumps• Malls & Multiplexes- Lower outlet investment than traditional

Positive & Negative of Strategy• Breakeven reduce 5 to 6 years while new countries 12 to 13 years• Increase revenues• Local raw material sourcing reduce the cost of Mc Products• 50% annual growth • CSR increase awareness / branding• 70/30 while taping 30% of rich market• Poor class want to have Mc Products but due to high prices its not affordable to lower income class• Not creating barrier to new entrants