ULSTER BUSINESS SCHOOL MASTER OF BUSINESS STUDIES STRATEGY AND MARKETING MANAGEMENT (Module code: BMG 777) Submitted to: Darryl Cummins and Geoff Simmons Submitted by:- B00541804 – Kevin C Abraham B00543323 – Sanoj Thaj B00544264 – Hemanth Ram B0054 – Akshay Kanda B00545863 – Rahul Shivpuje Date : 30 th April 2010 CONTENTS Title McDonald’s in India Main challenges in entering Indian market Industry trends: Overall McDonald’s marketing mix Product Life Cycle Comparison of McDonald’s with its rivals McDonald’s India in 2010 Market Orientation
McDonald’s Indian future References Title: McDonald was founded by Raymond Kroc in 1954. Today McDonald is the world’s leading food service retailer with more than 31000 restaurants in 119 countries serving more than 50 million customers each day. McDonald’s In India: McDonald’s, the ninth valuable brand in the world has opened its doors in India on October 1996. McDonald’s India has a joint venture with Connaught Plaza restaurants and Hard Castle restaurants. McDonald’s [India] has a 50 percent equity stake each in both joint venture companies.
Connaught Plaza restaurants manage operations and expansions across North India led by Vikram Bakshi where Hard Castle restaurants operate restaurants headed by Amit Jatia who manages operations and expansions across Western India. Main challenges in entering Indian Markets: Re-engineering the Menu: McDonald’s has developed a menu especially for India with vegetarian selections to suit Indian tastes and culture. Globally McDonald’s was known for its hamburgers, beef and pork burgers. Most Indians are barred by religion not to consume beef or pork. To survive, the company had to be responsive to the Indian sensitivities.
So McDonald’s came up with chicken, lamb and fish burgers to suite the Indian palate. 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 McAlooTikki. The separation of vegetarian and non-vegetarian sections is maintained throughout the various stages of procurement, cooking and serving. McDonald’s Indian Menu: Vegetarian Non Vegetarian McVeggie Chicken Maharaja Mac McAlooTikki McChicken Burger
Paneer Salsa Wrap Shahi Chicken McCurry Crispy Chinese Wrap Chicken Mexican McCurry Pan Fillet-O-Fish Pizza McPuff Currently McDonald’s have 132 outlets in 34 cities: McDonald’s has 157 restaurants in India where 83 in North and East India and 74 in West and South India. Industry Trends: Overall Fast food and chain service restaurants continue to gain in popularity. Fast food has typically been viewed as against healthy eating. But that’s no longer a perception. This is because sub way which was voted top overall for food.
But when considering McDonald and Burger king, they did not make it in the top food. But McDonald is doing well in other categories like child friendly and best drive thru (http://industry. bnet. com). The main strategy that McDonald’s following is the ‘three- legged stool’. According to this, the company focuses mainly on employees, owners and suppliers. For the successful growth of the company, these three are essential and must be strong. Another McDonald’s strategy is the ‘plan to win’ approach and it functions as a global McDonald’s benchmark for its operation.
This strategy focuses on profit growth and long term sustainability of the company. The strategy includes the central 5 P’s which are; people, products, place, price and promotion and the objective is to enhance the customers’ experience and satisfaction. Each P has its own vision, specific objectives and performance measures (Worldwide CR Report, 2006; McDonald’s Worldwide, 2008; Annual McDonald’s Report, 2006). McDonald’s is segmented geographically into the Area of the World (AOW) which consists of North America, Europe and Latin America and there is also the Asia/Pacific, Middle East and Africa (APMEA) segment.
These segments help the company control quality and distribution of required resources and products (http://eprints. ru. ac. za). McDonald’s Marketing Mix (4 P’s) in India McDonald’s 4 P’s are, Product| Price| Place| Promotion| Product: Product is the physical product or service offered to the consumer which includes certain aspects such as packaging, guarantee, looks etc. McDonalds bring with it a globally reputed brand, world class food quality and excellent customer specific product features. McDonalds studied the behavior of the Indian customer and provided a totally different menu as compared to its International offering.
It dropped ham, beef and mutton burgers from the menu. India is the only country where McDonald’s serve vegetarian menu along with few chicken and fish items. The fast food retail chain has separate production lines and processes for its vegetarian and non-vegetarian offerings. Even the sauces and cheese used in India are 100% vegetarian. McDonalds continuously innovates its products according to the changing preferences and tastes of its customers. The recent example is the introduction of the Chicken Maharaja Mac. The Mc curry Pan, an original reation of India is very popular dish in Indian McDonald’s restaurants. Another thing to consider while placing a product in a new market is its life cycle. According to Sir Adrian Cadbury (2005) for brands to endure they have to be maintained properly and imaginatively. Brands are extremely valuable properties and, like other forms of property, they need to be kept in good repair, renewed from time to time and defended against squatters. ” Importance of PLC in McDonalds: The requirements of customers change over time and thus the product offering has to be changed accordingly.
What is the fashion today may be out of market within few weeks. Thus continuous innovation is required. (Source: www. managementfunda. com). To counter these changes McDonalds has continuously introduced new products and has phased out the old ones which were at the decline stage of their PLC. The introduction is timed such that the new product does not cannibalize the product already in the maturity or growth stage. Thus the secret lies in getting profits with different products in the different stages of the PLC A perfect example of revitalizing a product in decline phase: Source: www. managementfunda. com). The French Fries have been an important part of the McDonalds menu worldwide. But now it was in the stage of decline and was actually not generating proper return. In an attempt to revitalize it, a new variant was introduced namely Shake Shake Fries. This is being served with chatpata spice mix which has resulted in increase in the sales of French Fries and has elevated it from to the decline stage. This is used to delay the decline of a well established product which has the potential of generating further revenue (www. managementfunda. om Price: Pricing is one of the most important elements of marketing mix which includes all costs associated with the product, service or program. It is the only mix which generates a turnover for the organization. There is a very popular punch line of McDonald’s-“Aap Ke Zamane Mein Baap Ke Zmane Ka Daam “ , is used to attract the middle class and the lower class people of India. The result of this is very much positive i. e. not only the upper class prefers going there but all class of people go there. McDonald’s Value Pricing:– * Happy meal – small burger, fries, coke + toy Medium meal combo – burger, fries, coke-veg Rs. 75 , Maharaja Mac meal Rs. 95 * Family dines under Rs. 300 * Price lower than Pakistan, Srilanka 50% lower than U. S. Pricing strategy, N. D. Available at: www. learnmaketing. net. [Accessed: 10th april 2010] Place: The place is where the customer receives the product, service or program. It refers to how an organization will distribute the product or service they are offering to the end user. A place that meets his or her needs better may be worth more. The ambience and the environment are same at all the outlets of McDonald’s.
Direct Distribution Indirect Distribution Manufacture Manufacture Retailer consumer consumer Promotion: Promotion decisions involve advertising, public relations, media types etc. According to Kotler [ 1994] Promotion or communication mix is consist of five major tools: Promotional mix Advertising| Public relation| Sales promotion| Personal Selling| Direct Mail| DDB Needham and Leo Burnett are the advertising agencies of McDonald’s world wide. The subsidiary of both the companies pitched for the account and the Indian partner ‘Mudra’ got the account.
Since the very beginning Mudra has been the advertising agency of McDonald’s India. The Mudra team meets up the Marketing team of McDonald’s and discuss the new strategies to be adopted. Advertising is conducted on TV, radio, in cinema, online, using poster sites and in the press for example in newspapers and magazines. Al the outlets are decorated with the pictures of the toys and even the paper mats has description of the burgers and toys. Some of the lucky promotion strategies were like: * Collaboration with coke, M TV, hungama. com, Sony music etc. * Scratch cards on large jumbo meals. Prices- caps, T- shirt, internet card, CD’s, free tickets to Lucky Ali’s contest. * Purchase of second meal in a month qualified for foreign trip/ lucky draw etc. Promotional techniques used for increasing the sale in India: * Increase its product line. * Lower the supply chain cost so that it helps in cost reducing. * Educate about healthy life style. * Focus on gifts for all generations [ kids , youth & senior citizen ] * Increase the space for provision of birthday parties. * Special promotions during festivals. * Try to sponsor college festivals * Work for social welfare of the society.
Co-Branding: McDonald’s has major tie ups with various companies as their co- branding strategy. Few of the companies are – Coca-cola, Barbie, Cadbury, Hot wheels etc. A comparison of McDonald’s with its rivals (World wide): Recorded revenue for 2006: (Graph1 Source: Worldwide CR Report, 2006; Welgens, 2006:6; Datamonitor, 2008). X- Companies, Y- Revenue ($ million). From the above graph it is clear that McDonald’s is dominating the fast food industry. The recorded revenue of McDonald’s for 2006 is $ 21, 586 million worldwide, which is by far greatest as compared to its main rivals Burger King and Yum brand.
Burger King’s revenue for the same period was only $ 2, 048 million. For KFC, which falls under the Yum brand had revenue of $ 9, 561 million in 2006, which is quite lower than McDonald’s McDonald’s competitors in India: McDonald’s competes with fast food chains like Pizza Hut, Domino’s Pizza, Subway, Nirula’s and KFC in India. 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 Food works under a master franchise agreement) has a 65% market share in the home delivery segment. 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 50-60crore 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. * For its unparalleled benchmarks established in the QSR sector McDonald’s India has been bestowed with many prestigious awards.
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 has an aggressive growth plan for India and has committed Rs 400crore over the next three years nationally, Bakshi said. While 40% of this money will go for expansion of the brand and introduction of new formats, the rest 60% will be directed towards back-end operations. McDonald’s company has achieved its globalization through applying the maxim ‘think global, act local’, which is one of the most important reasons for their success in India.
Market Orientation: Grinstein (2008) recommends market orientation as the culture of organization that enhances the effective and efficient supervision of market, to attain significance for sellers and buyers leading to profitability. Narver et al. , (2004) suggested that there are two types of approaches to market orientation: proactive and responsive approach. Proactive approach is based upon solutions and satisfying unidentified needs of consumers which are latent. Responsive approach is based upon solutions and satisfying identified needs of consumers which are expressed.
Due to diabetes, obesity, and other health problems are consumers are swapping their style of eating towards healthy conciseness (Bold, 2006; Warner ; Barriounuevo, 2005). India’s health problems have made consumers choosier and health oriented. Parents are becoming more cautious about their children’s diet (Gibson, 2007). Low salt, sugar and fat: McDonalds in order to meet consumers expressed needs; they are bringing various series of changes. It all started of in 2003 by introducing healthy menu with products that are low in salt, sugar and fat (Klienman, 2003).
By 2006 McDonalds swapped their usage of saturated fat to vegetable trans-fat free cooking oil. Later McDonalds introduced Diet Coke, Sprite Zero and reduced their usage of sugar content in burger bun. Lastly McDonalds cut down large percent of salt in french fries, Vegetarian McNuggets and Chicken McNuggets (Bowery, 2006). Lacto Vegetarians: McDonald’s in the process of product adaptation to gain foothold in the Indian fast food market. Indian fast food market consists of 30% population of vegetarian consumers. Beef and Pork was strictly not accepted by Indian population, which are the main ingredients of McDonald’s hamburger.
McDonalds India despite introduced McAloo Tikki burger for vegetarians and chicken, fish for non-vegetarians. McDonalds India provide “Shudh Shakari Experience” means pure vegetarian experience, where cooking for vegetarian products is separate to non-vegetarian. www. mcdonaldsindia . com Latest nourishing menu: The McDonalds products with low salt, sugar and fat followed up with latest serial of nourishing and healthy menu. McDonalds have removed super-size meal from their menu after many encounters and added salads to replicate the demand of the market (Bowery, 2006).
McDonalds offered Indian Customers with vegetarian nuggets, vegetarian and non-vegetarian gourmet salads, vegetarian burgers like McAloo Tikki Burger, whole-wheat buns for sandwiches, yoghurt parfait, orange juice and bottled water. The McDonalds kids meal in India have been altered to suit the health preferences of parents towards their children, where McDonalds provide the option to choose between soft drink, French fries with fruit smoothies and fruit bags with no artificial colors and very less grams of saturated fat. Nutrition values:
McDonalds in USA faced various encounters of law suits and media exposure of its denial in displaying nutritional facts are the final result of McDonalds in 2005 worldwide came out with decision to display its nutrition facts on the tray liners, online and in store brochures. McDonalds also re-designed and changed its packing accordingly to display nutritional facts. Currently the only fast food chain to display nutritional facts in India is McDonalds. (www. indiaenvironmentportal. org). McDonald’s India in 2006 at its 10th anniversary announced an investment of US$ 100 Million for 3 years to add 130 restaurants. ww. ojica. fiu. edu) McDonald’s Indian future: McKinsey Global Institute in 2007 reported that India will be leading global consumer market by 2025 with 63% teenager, adults’ population and 32% of children population in India. India is one of the major market potential and is considered as one among top 10 markets for McDonald’s. Despite perception of McDonalds as American cultural imperialism, encounters, allegations are only the smaller challenges compared to product tweaking, which is a major challenge for McDonalds to suit themselves to India.
McDonalds Hamburger University can be setup in India to test and tweak products to suit Indian consumer market as it is established in USA. McDonald’s opportunity to be food sponsor for Delhi Commonwealth games 2010 can help McDonald’s to gain better perception among Indian consumers. McDonalds believe to follow and stand on its founder’s vision – service, cleanliness and quality. But the expectations of consumers on McDonalds are growing enormously. The vision itself is not sufficient and there are more expectations to be met for this generation consumers in India.
McDonalds can achieve its expectation by creating balance among the market orientation, entrepreneurial orientation and learning orientation instead of focusing only on market orientation to achieve its profitability. References: Bold, B. (2006). TBWALondon wins McDonald’s health brief. Campaign (UK), 1. Bowery, J. (2006). McDonald’s gets back to basics. Marketing 16. Czinkota, M. (1993, International Market, Dryden Press, Fort Worth, TX. Gibson, R. (2007). McDonald’s Is working On Healthier Happy Meal. Wall Street Journal, p. B3D. Grinstein, A. 2008). The relationships between market orientation and alternative strategic orientations: A meta analysis. European Journal of Marketing, 42, 115-134 India Environmental Portal. (2008). Knowledge for Change. Available: http://www. indiaenvironmentportal. org. in/node/258411. Last accessed 20 March 2010. Jaworski, B. J. , ; Kohli, A. K. (1996). Market orientation: Review, refinement, and roadmap. Journal of Market Focused Management, 1(2), 119-135. Kleinman, M. (2003). Burger chains to lure back dinners. Marketing, 4. Kotler,P. 1994), Marketing Management ,Prentice-Hall ,Englewood Cliffs ,NJ. MacCarthy, E. J. (1993, Basic Marketing, Irwin, Homewood, IL. Managerial perceptions of corporate social responsibility and social practices present at McDonald’s South Africa, available at http://eprints. ru. ac. za/1579/1/Bockle-masters-tr09-117. pdf. Accessed on, 21/04/2010. Marketing Strategies of McDonalds Available at: http://fliiby. com/file/369043/582plkc1f. html [Accessed on: 11th April 2010]. McDonald’s – Business Strategy in India,2010. Updated: Friday, January 8, 2010 Available at: