MCDONALD’S IN INDIA

INTRODUCTION

• McDonald's fast food restaurant is one of the largest franchises in the

United States as well as aboard.

• There are more than 32,000 McDonald's restaurants serving in 119

countries. More than 75% of McDonald's restaurants worldwide are

owned and operated by independent owners serving almost 47

million customers each day.

MISSION STATEMENT

• "McDonald's vision is to be the world's best quick service restaurant

experience. Being the best means providing outstanding quality,

service, cleanliness, and value, so that we make every customer in

every restaurant smile."

.

• McDonald’s core competency is providing convenience when

people need and want to eat fast food at prices that are competitive

and provide best value for the customer's money.

• It focus on consistency of quality, production of food and use of raw

materials all around the world.

CORE COMPETENCY AND SUSTAINABLE COMPETITIVE ADVANTAGE

MCDONALD’S IN INDIA

The India strategy was divided into four phases-

• entry

• building the supply chain

• aggressive growth

• penetration.

• In 1993 McDonald’s entered India through a 100% subsidiary MIPL (McDonald’s India

Private Limited) which formed two 50:50 joint ventures (JV) with Vikram Bakshi of

Connaught Plaza Restaurants to manage North and East India; and Amit Jatia of

Hardcastle Restaurants for West and South India. The staff was trained in India, US and

Indonesia to understand the intricacies of business

CHALLENGES IN ENTERING INDIAN MARKETS

• Surveys commissioned by McDonald’s, showed a large eating

out market in India with an increasing propensity to spend by

customers.

• Indians wanted to taste American fast food, but it could not

be a substitute for Indian food. Hence adapting McDonald’s

menu to Indian tastes was critical if they were to succeed in

India.

• One aspect unique to India was that half its population was

vegetarian for whom a separate menu had to be created.

• The average Indian had limited purchasing power hence

THE VEGETARIAN CUSTOMER

• India has a huge population of vegetarians. To cater to this customer

segment, the company came up with a completely new line of

vegetarian items like McVeggie burger and McAloo Tikki. The

separation of vegetarian and non-vegetarian sections is maintained

throughout the various stages.

• A Restaurant Management System (RMS) was created for efficientmanagement of the operations.

• Separate food lines were maintained throughout the variousstages of procurement, cooking and serving.

• Separate kitchens for vegetarian and non-vegetarian food werecreated in the restaurants with different uniforms for the kitchenstaff.

• Separate areas for preparation and wrapping were created.

• The vegetarian menu was printed in green and the non-vegetarian menu in purple to clearly distinguish the menus.

• Customers were given RMS brochures to assure them of clearsegregation of vegetarian and non-vegetarian food, and taken onkitchen tours to build their confidence, since the hard corevegetarians usually did not prefer to enter places where non-vegetarian food was served.

SEGMENTATION, TARGETING AND POSITIONING

• McDonald’s uses demographic segmentation strategy with

age as the parameter. The main target segments are

children, youth and the young urban family

According to BCG Matrix McDonald’s is a star. The reason for this is its high market growthand high market share in the Indian market. On the other hand KFC and Pizza Hut are thecash cows because of their low growth rate and high market share. During past someyears KFC and Pizza Hut have lost their market growth because of the fact that they losttheir standard war to their competitor i-e McDonald’s. Another direct competitor ofMcDonald’s is Subway. According to BCG Matrix it is a dog. Some of the reasons that areresponsible for its low market share and low market growth are the less expansionstrategies being followed by the company.

CUSTOMER PERCEPTION AND CUSTOMER EXPECTATION

• Customer perception is a key factor affecting a product’s success.

Many potentially revolutionary products have failed simply

because of their inability to build a healthy perception about

themselves in the customers’ minds. McDonalds being an

internationally renowned brand brings with it certain expectations

for the customers.

Target customer What is McDonalds for me?

A family with children

Urban customers on the move

Teenager

A treat to children, a fun place to be for the children.

Great taste, quick service without affecting the work schedule

Hangout with friends, but keep it affordable.

INDIAN FACTS – BIG OPPORTUNITIES

• India added 181 million people between 1990 and 2001.

• India is the only country where the population will continue growingfor the next fifty years.

• Most high-income Indians prefer to live in the urban areas.

• Over the 70% of wealthy urban Indian consumers live in the mostpopulated and cosmopolitan cities in India

• India is part of the BRIC (annual average growth of more than 5%, andby 2032 its GDP will be bigger than Japan’s).

• High income residents are seeking variety in their choice of foods andare willing to spend more in international cuisine including fast foods.

PROBLEMS

• Indian diversity.

• Religion/Cultural constraints.

• Environmental and animal activists opposed the entry offast food (like KFC and McDonald’s).

• The Idea than this type of junk food destroy the ecologicalbalance and cause several behavioral disorders because ofthe fatty and unhealthy foods.

• Perception that McDonald’s was a food for rich people.

• Poor transportation and storage infrastructure.

• Lower-quality agricultural products.

INDIAN FOOD PREFERENCES

COMPETITIVE ADVANTAGES IN INDIA

• All-vegetarian restaurants in various pilgrimage sites: McDonald’s plans to

open all-vegetarian restaurants (by middle of 2013) at various pilgrimage sites

across India. To begin with, the company plans to target pilgrims at sites like

Vaishno Devi in Katra, Jammu and Kashmir and at the Golden Temple in

Amritsar. It already has one outlet in Katra.

• Cluster wise expansion strategy: McDonald’s adopts a cluster wise expansion

strategy in India. Accordingly, McDonald’s concentrates and consolidates

stores in one region before moving to another. The company plans to begin

with East Indian region (Kolkata) and then move to cities in other regions like

Chandigarh and Ludhiana

• Local Sourcing: By 2014, McDonald’s India estimates that it would source 50,000

Metric Tonnes (as compared to the current 30,000 MT) of potatoes from McCain

Foods Pvt Ltd. in India. McCain has been working with more than 800 farmers on

approx. 4000 acres of land across Gujarat (West India) under contract farming of

potatoes.

• Spending on food: According to Euromonitor International and Credit Suisse

Emerging Consumer Survey, Indian people spend less ($11) compared to the Chinese

($60) on fast food. Indians spend approx 23% of their earnings and the Chinese

approx 20% of their earnings on food. The U.S. spends less than 15% on food.

• McDonald’s India’s total investment in India would touch 1500 crores by 2014. In

June 2012, McDonald’s announced that it would open around 250 new restaurants in

the next 3 to 5 years with an investment of 750 crore rupees.

• OOH Branding: According to Rameet Arora, senior director – marketing, McDonald’s India (West

and South), McDonald’s India may be the largest out-of-home branding (OOH) in the country.

McDonald’s India has restarted OOH (out-of-home branding) after a 7 to 8 year break to reach to

their target group.

• Employees and Customers: In India, McDonald’s employs 5,000 people and serves half a million

customers a day via its 169 family restaurants. (Update) – McDonald’s India employees number

12,000 approximately (most of them students). McDonald’s has 85,000 employees and serves 2.5

million customers a day in the UK.

• New Business Channels – To boost sales, McDonald’s is looking at new business channels instead

of rapid expansion. New business channels include home delivery, kiosks, breakfast, extended hours

and drive-throughs. As per estimates, home delivery can increase store sales about 15% and drive

through by 50%

• Local Vegetarian Menu: In India, McDonald’s does not offer pork or beef-based products.

It’s menu is more than 50 per cent vegetarian. The fast food retail chain has separate

production lines and processes for its vegetarian and non-vegetarian offerings.

• High Real-Estate costs in India: In many countries, in a Quick Service Restaurant (QSR) a

customer comes in, buys and then leaves. This is known as a revolving door concept. But an

Indian customer believes in a dine-in culture. This adds to the real estate costs which goes as

high as 20-25 per cent as compared to 10-15 per cent globally. The cost of opening a new

McDonald’s restaurant in India costs about 3 crore rupees.

• The most important meal for QSRs- Morning Meals (Breakfast):According to market

research company, the NPD Group, breakfast accounted for nearly 60 per cent of the

restaurant industry’s traffic growth over the past five years in the U.S. Quick service

restaurants sold 80 per cent of the over 12 billion morning meals served at US restaurants

for the year ending in March 2010.

• Taco Bell in India – In March 2010, Taco Bell, the Mexican specialty chain owned by US-

based fast food brands operator Yum! Restaurants launched its first outlet in Bangalore,

India. The company which also operates brands like Pizza Hut and KFC plans for contract

farming to open up to 100 outlets by 2015 and also expand into Tier-II and -III Indian

cities eventually

Most Preferred Multi Brand Fast Food outlets: In 2009, McDonald’s India won the

CNBC Awaaz Consumer Awards for the third time in the category of the Most

Preferred Multi Brand Fast Food outlets.

McDonald’s India in 2010 – In 2010, McDonald’s India plans to open 40 more

outlets. The company has also earmarked a budget of Rs 50-60 crore to market its

new products and initiatives for consumers. Its new marketing campaign is titled –

‘Har Chotti Khushi Ka Celebration’ – in other words ‘celebrate little joys of life’

where it positions McDonald’s as a venue for enriching life of consumers. In South

India, McDonald’s has 29 outlets and plans to add 10 more by end of 2010.

McDelivery Online – In India, McDonald’s first launched home delivery of meals in

Mumbai in 2004. McDonald’s now has plans to launch web-based delivery service in India

(across 75 McDelivery cities) in 2010, a pilot for which has already been tested by it in

Hyderabad. The company hopes to add 5 per cent to sales via Web delivery. McDonald’s

web-based delivery model will be based on serving the customer quickly wherein the drive

time does not exceed seven minutes because its food has to be eaten within ten minutes of

preparation. The footfalls in India are amongst the highest in the world, but the average bill

is amongst the lowest. At present (March 2010), Domino’s Pizza (operated by Bhartia

Group-promoted Jubilant Foodworks under a master franchise agreement) has a 65%

market share in the home delivery segment.

MFY (Made for You) food preparation platform – MFY is a unique concept (cooking

method) where the food is prepared as the customer places its order. All new upcoming

McDonald’s restaurants are based on MFY. This cooking method has helped McDonald’s

further strengthen its food safety, hygiene and quality standards. McDonald’s has around

10 MFY restaurants in its portfolio.

How McDonald’s manages to keep its prices down? – Fast-food chains face a tough

time balancing between margin pressures and hiking prices which can hurt volumes.

Consequently, the chains have to increase rates or rework their strategies. Affordability

has been the cornerstone of McDonald’s global strategy. Some of its measures to achieve

this include – Bulk buying, long-term vendor contracts, and manufacturing efficiencies.

Quick service restaurants in India – By October 2009, McDonald’s India had

more than 170 quick service restaurants in India. Domino’s Pizza, which began

operations in India in January 1996, has over 275 stores across 55 cities in the

country. KFC has 46 restaurants across 11 cities in India. (KFC is one of the 5 brands

owned by Yum!. KFC is a $12 billion global brand and a leading quick-service

restaurant (QSR) in many countries.) Nirula’s, one of India’s oldest food chains

(completed 75 years in service in March 2009), has a network of around 62 outlets in

five states across Northern India. Nirula’s, established in 1934 has interests in hotels,

restaurants, ice cream parlours, pastry shops and food processing plants. Nirula’s

was the first to introduce burgers in India.

Food Industry in India – In India, food industry and particularly informal eating

out market is very small. In India, over quarter of a million customers visit

McDonald’s family restaurants every day. The Indian fast food market is valued at

$1-billion (Rs 4,547 crore) aprrox.

LOCATION

McDonald’s opened its first outlets in Mumbai and Delhidue to:

• These 2 cities have metropolitan culture and wideWestern exposure.

• There live the most of the Indian’s rich and uppermiddle class inhabitants who were aware ofMcDonald’s food.

• There were the 2 distribution centers of McDonalds.

Due to logistics play a critical role in McDonald’s locationstrategy, the first outlets were opened only within a500Km radius of its main distribution centers.

McDonald’s also made some partnerships in order toopened outlets besides the petroleum stations, railwaystations and drive-through in Delhi and along nationalhighways.

“POLITICALLY CORRECT” STRATEGY

How to avoid hurting religious sensibilities of Indian consumers?

(80% Indians revere cows as sacred and 150 million of Indian Muslims do not eat pork and beef.)

Adaptation

McDonald’s adapted itself to the Indian market introducing a mutton-based “Maharaja Mac” in India as opposed to its flagship beef-based Big Mac.

GREEN SENSITIVITYA vocal group of environmentalists, raised campaigns against junk food,saying that McDonald’s and KFC destroy ecological balance and causebehavioral disorders because of their fatty and unhealthy foods, which haveexcessive levels of monosodium glutamate. Also they said this food is antipoor.

To face up this campaigns McDonald’s:

• Instituted a special fund to support Green movements.

• Has sponsored various community-related activities, such as “keep yourcity clean” to promote environmental consciousness.

• Adopted the slogan “We love Green”.

• Has sponsored and promoted several sports activities in order to attempt ahealthy lifestyle like the “Olympic Day Run”.

• Is focusing on fine tuning its fast food image adding health food options toits product.

CORPORATE CITIZENSHIP

McDonald’s has:

• Understood than “giving back” to society gain benefits andreputation. (like community projects for the children, for example:McDonald’s Spotlight a interschool performing art competition).

• Sponsored children programs as the Millennium Pune Festival(search talents for children between 8 to 15 years) in collaborationwith UNESCO and Disney World Resort.

• Sponsored the Pulse Polio program that aims to make India polio-free country until 2005.

• Participated in celebrating days like World Children’s Day and intheir own initiative known as the “Blue Dot” that supportseducational programs for the girl child.

PRICING – UP SELLING

McDonald’s strategy has been to increase sales volume of its products

by making it products available at an affordable price. They started

cutting off some prices and offering value meals in a range of prices:

Rs29, Rs39, Rs49, Rs59, Rs79 and Rs89.

PRICING – CROSS SELLING

McDonald’s offers different Add-Ons and Bundles:

EMPLOYMENT OPPORTUNITY

McDonald’s typically employs localpeople:• Each restaurant in India employs

more than 100 people: Cashiers Cooks Managers Attendants

• Also every expansion bringsadditional employmentopportunities to India’sagricultural work force.

SUPPLY CHANGE MANAGEMENT

Objectives:1) To operationalize its globally

practiced QSCV (quality,service, cleanliness andvalue).

2) To enjoy flexibility in pricing.3) To launch a new product

when necessary.

FAMILY AND CHILD CENTRIC STRATEGY

To attract families, McDonald’s Offer:

• A clean, comfortable and stress free

environment

• For young busy working parents: A

safe place for Children to play while

parents can eat and relax.

• For children: Birthday celebrations,

cakes, candle, toys.

• A meeting place for teenagers

• Lounges for Senior Citizens

PROMOTIONS TO ENGAGE CUSTOMERS

• “Lucky Itch”, instantscratch-win prizes

• "Music Meal“, created toattract young adults.

RECOMMENDATIONS

• Expand to other Cities to increment profits:

• Development of new distribution centers.

• Additional Adaptation Cost/New product development (due to different regional preferences)

• Reinforce the family engagement

• Due to the “American Dream” is important in India, maybe they can open some outletsnear to the most important universities.

• Use Social Media Marketing to be in touch with Loyal Customers/Fans.

• Create contests to create to get consumers feedback, something similar than PeruvianFast Food Chain called Bembos, which created a contest called “Create your Bembos(Burger)”. So, each consumer is able to submit his own recipe and he can won a Prize if hisrecipe is the one selected by the jury.

• Due to there is a growing fitness culture in the world, maybe, some vegetarian productscould be adapted to other markets.

• Due to there are some places as New York, California and Florida with a high populationof Indian immigrants , maybe, some of the product developed for India could be offeredthere.

CONCLUSION

• McDonald’s continues product innovation and customer satisfaction through greater

customer reach.

• In order to sustain in a very competitive market McDonald’s has to continuously think of

bringing in new concepts into all its operations especially in marketing.

• The result of a spontaneous thought led to the introduction of breakfast outlets and a

chance encounter with a technology specialist ended up with online booking orders and

birthday parties and signature outlets.

• These are signature products of McDonald’s and this will in the long run help McDonald’s

to improve it already ace services with better customer service and great shopping

experience.

• The success of McDonalds in India could be measured by its continuous growth in Indian

fast-food market with 210 branches across India (Nation’s Restaurant News, 2011)

•