You are on page 1of 24

1.

INTRODUCTION & HISTORY

1.1 Introduction:

When the Dick and Mac McDonald opened their first restaurant in San Bernardino,
California in 1948, they never could have imagined the extraordinary growth their company
would experience. From modest beginnings, they found a winning formula selling high
quality products quickly and low-cost. It was not until 1955 when Ray Kroc, a salesman from
Chicago, became involved in the business that McDonald's really began to flourish. Kroc
realized the same successful McDonald's formula could be exploited throughout the United
States and beyond with the use of franchising. A franchise is an agreement or license to sell a
company's products exclusively in a particular area, or to operate a business that carries that
company's name.

In 1955, Kroc knew that the key to success was through rapid expansion; thus, the
best way to achieve this was through offering franchises. Today, over 70 percent of
McDonald's Restaurants are franchises. In 1986, the first franchised McDonald's opened in
the United Kingdom. Now, there are over 1,150 restaurants, employing more than 49,000
people, of which 34 percent are operated by franchisees. Moreover, there are over 30,000
these restaurants in more than 119 countries, serving over 47 million customers around the
world. In 2000 alone, McDonald's served over 16 billion customers. For perspective, that
number is equivalent to providing a lunch and dinner for every man, woman, and child in the
world! McDonald's global sales were over $40 billion, making it by far the largest food
service company in the world.

Now McDonald’s Corporation USA is the ninth most valuable brand in the world. In
October 1996, McDonald’s opened its first Indian outlet in Vasant Vihar, an affluent
residential colony in India’s capital, New Delhi. As of November 2004, McDonald’s has
opened a total of 58 restaurants, mostly in the northern and western part of India. While
McDonald’s opened 34 restaurants in five years (by 2001), 58 restaurants in eight years (by
2004), it is now planning to add more than 90 new restaurants in the next coming years.
Although the initial scenes of crowds lining up for days outside the McDonald’s restaurants
in Delhi and Mumbai are no longer seen, Indian consumer response to McDonald’s products
still remains very strong.

McDonald's India is a joint-venture


company managed by Indians. McDonald’s
India, a subsidiary of McDonald’s USA, has
expanded its presence in India via 2 joint
venture companies – Connaught Plaza
restaurants and Hardcastle restaurants.
McDonald’s (India) has a 50 per cent equity
stake each in both joint venture companies.
Connaught Plaza restaurants manages
operations and expansions across North
India (Delhi, Jaipur and Punjab) – led by Vikram Bakshi – and Hardcastle restaurants, which
is headed by Amit Jatia, manages operations and expansions across Western India (Mumbai,
Pune, and Gujarat).

1
The growth of McDonald’s in India is not as rapid as in other countries. How did
McDonald’s do it? How did a hamburger chain become so prominent in a cultural zone
dominated by non-beef, non-pork, vegetarian, and regional foods such as chola bhatura,
kababs, bhaji, idli, samosa, dosa, vada, sambar, bhelpuri, and rice? The answer to this
question lies in McDonald’s carefully planned entry and expansion strategy in accordance
with India’s changing political, economic, and cultural landscape in the 1990s.

Six years prior to the opening of the first McDonald's restaurant in India, McDonald's
and its international supplier partners worked together with local Indian Companies to
develop products that meet McDonald's rigorous quality standards. Part of this development
involves the transfer of state-of-the-art food processing technology, which has enabled Indian
businesses to grow by improving their ability to compete in today’s international markets.
McDonald's constructs its restaurants using local architects, contractors, labour and - where
possible – local materials. McDonald's hires local personnel for all positions within the
restaurants and contributes a portion of its success to communities in the form of municipal
taxes and reinvestment.

The above aspects of McDonald’s do not get covered and highlighted by the news
hungry press. But when the false news of using beef allow in the French fries hit the market,
the press did not leave a chance to exaggerate it. Despite the fact that right form the
beginning; no beef ingredients have been used in any of the products in India.

The marketing agency of McDonald’s, Mudra comes to its rescue in such times. The
advertisements created by Mudra are a rage all over the nation, especially amongst the
children. Who can forget the little kid who gets nervous in the school competition, but
becomes happy again when his father takes him to McDonald’s?

McDonald’s India has tried not to leave any stone un-turned in its objective to satisfy
the Indian customer. But in Amit Jatia’s words, “Customers are generally not forgiving.”
According to the survey conducted, customers demand low prices, more seating space, more
variety, home delivery, and the list is endless.

The fundamental secret to McDonald’s success is the way it achieves uniformity and
allegiance to an operating regimen with proper marketing strategy. McDonald’s India has to
adhere to many rules and regulations laid down by the parent company, and it still has to
cater to the Indian customer and his needs. McDonald’s India is a case study on how to mix
conformity with creativity.

2
2. PHILOSOPHY & VISION

Every company has a Vision or Mission Statement. A vision statement should be


short, clear, vivid, inspiring and concise without using jargon, complicated words or
concepts. It represents the corporation guiding principles. It subtly indicates the businesses
the firm will pursue and the customer needs it will seek to satisfy. The vision statement also
allows the employees to clearly adhere to the standards set up by the business unit and work
in as per the guidelines framed by the company.

2.1 McDonald’s Vision 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."

The McDonald's philosophy of Quality, Service, Cleanliness and Value (QSC&V) is


the guiding force behind its service to the customers. McDonald’s India serves only the
highest quality products. All McDonald’s suppliers adhere to Indian Government regulations
on food, health and hygiene while continuously maintaining their own recognized standards.
All McDonald’s products are prepared using the most current state-of-the-art cooking
equipment to ensure quality and safety. At McDonald’s, the customer always comes first.
McDonald’s India provides fast friendly service- the hallmark of McDonald’s that sets its
restaurants apart from others. McDonald’s restaurants provide a clean, comfortable
environment especially suited for families. This is achieved through McDonald’s stringent
cleaning standards, carefully adhered to.

McDonald’s menu is priced at a value that the largest segment of the Indian
consumers can afford. McDonald’s does not sacrifice quality for value – rather McDonald’s
leverages economies to minimize costs while maximizing value to customers. The main
effort of McDonalds’s service is to make customer the whole sole beneficiary through its
stringent standards maintained all over the world.

3
3. SWOT ANALYSIS

3.1 SWOT Analysis –

SWOT stands for strengths, weaknesses, opportunities, and threats. To meet the needs
of the key market it is important to analyse the internal marketing strengths of the
organisation. Strengths and weaknesses must be identified, so that a marketing strategy which
is right for the business can be decided upon. Once the strengths and weaknesses are
determined, they are combined with the opportunities and threats in the market place. This is
known as SWOT analysis. SWOT analysis is a tool for auditing an organization and its
environment. It is the first stage of planning and helps businesses to focus on key issues.
Once key issues have been identified, they feed into marketing objectives.

Strengths

• McDonalds has built up huge brand equity. It is the No. 1 fast-food company by sales,
with more than 31,000 restaurants serving burgers and fries in almost 120 countries.
Sales, 2007 (11, 4009 million), 5.6% sales growth.
• Good innovation and product development. It continually innovates to retain
customers in the business.
• The McDonalds brand offers consumers choice, reasonable value and great service
• Large amounts of investment have gone into supporting its franchise network, 75% of
stores are franchises.
• Loyal staff and strong management team.
• Advertisements and promotion to market the McDonalds’ as a brand carves a strong
image on customer’s mind.

Weaknesses

• Core product line out of line with the trend towards healthier lifestyles for adults and
children. Product line heavily focused towards hot food and burgers.
• Locations of outlets are sometimes not to closer to storage centres resulting in loss of
quality.
• Seasonal.
• Quality issues across the franchise network.
• Break-even sales can be generated after operating for certain number of years only.

Opportunities

• Joint ventures with retailers (e.g. supermarkets).


• Consolidation of retailers likely, so better locations for franchisees.
• Respond to social changes - by innovation within healthier lifestyle foods. Its move
into hot baguettes and healthier snacks (fruit) has supported its new positioning.
• Use of CRM, database marketing to more accurately market to its consumer target
groups. It could identify likely customers (based on modelling and profiles of
shoppers) and prevent brand switching.

4
• Strengthen its value proposition and offering, to encourage customers who visit coffee
shops into McDonalds.
• Installing children’s play-parks and focus on educating consumers about health,
fitness.
• Continued focus on corporate social responsibility, reducing the impact on the
environment and community linkages.
• Expansion into emerging markets of cities present in India.
• Focus on middle-class income group customers with low-priced quality goods will
enhance the profit margin.
• Senior Citizens have been totally deprived of marketing strategy adopted by
McDonald’s. The burgers and eatables are more Indianized so that senior citizens find
it familiar but the introduction of more milky beverages would attract more senior
citizens and kids.

Threats

• Social changes - Government, consumer groups encouraging balanced meals, 5 a day


fruit and vegetables.
• Focus by consumers on nutrition and healthier lifestyles.
• Competitive pressures on the high street as new entrants offering value and greater
product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S.
• Recession or down turn in economy may affect the retailer sales, as household
budgets tighten reducing spend and number of visitors.
• Pressure groups - environmental.
• Since McDonald’s is a symbol of American cultural imperialism, it continues to face
continue opposition from religious fundamentalists, protectionists, animal rights
activists, and anti-globalization protestors.

5
4. MARKETING OBJECTIVES

A Marketing plan must be created to meet clear objectives. Objectives guide


marketing actions and are used to measure how well a plan is working.
These can be related to market share, sales, and goals, reaching the target audience and
creating awareness in the marketplace. The objectives communicate what marketers want to
achieve.Long-term objectives are broken down into shorter-term measurable targets, which
McDonald's uses as milestones along the way. Results can be analyzed regularly to see
whether objectives are being met. This type of feedback allows the company to change plans.
It gives flexibility. Once marketing objectives are set the next stage is to define how they will
be achieved. The marketing strategy is the statement of how objectives will be delivered. It
explains what marketing actions and resources will be used and how they will work together.

• McDonald’s plans to open as many as 140 restaurants throughout India this year,
focusing on drive-through outlets.
• Investment of more than Rs.400 crore in the next two years to expand its operations.
• Transform itself into a high-volume, mass-market brand with compounded annual
growth at around 30 per cent to 35 per cent in the next few years.
• Addition of franchisees as current 75% income generated is from franchisee centers
affiliated to McDonald’s.
• Moving out of the metros and concentrate its efforts on other mid-sized cities in
providing service. The plan is to enter a new city, understand the market and then
multiply by opening up more outlets in these cities rather than spreading to too many
cities at a time
• Increase the number of customers turning up at its restaurants around the country by
providing the same service and quality by achieving 100% customer satisfaction.
• Target on customers between age-groups 24-38 with children’s to position itself as a
family restaurant and the ideal place for kids and teenagers.
• Increase brand loyalty among customers. To build a new generation who will stay
with the brand and then emerge as a long-term player.
• Introduce new innovative menus by development of new products, which cater to
people's needs by keeping Indian tastes in mind and to provide greater choice whilst
ensuring that the products meet the requirements of a balanced diet, so that the
crowds keep pouring through the doors.

6
5. MARKETING STRATEGY

5.1 McDonald’s Road Map for India –

5.1.a Emphasis on Local Management:

McDonald’s has given the adage of “think global, act local” a concrete shape in India.
The company’s localization strategy is clearly manifest in the critical area of management.
McDonald’s decided to set up two joint ventures on a 50:50 basis with two local
entrepreneurs in Mumbai and Delhi. In Mumbai, Amit Jatia’s company, Hardcastle
Restaurants Private Limited, was selected to own and manage McDonald’s restaurants in the
western region. In Delhi, Vikram Bakshi’s Connaught Plaza Restaurants Private Limited was
chosen to own and manage McDonald’s restaurants in the northern region. Both Vikram
Bakshi and Amit Jatia are responsible for running McDonald’s in India. Vikram Bakshi has
extensive background in real estate development in Delhi, while Amit Jatia, a vegetarian, has
a chemicals and textile business background in Mumbai. It was not their backgrounds,
however, that won the confidence of the Big Mac’s management. Rather, it was their
business plan emphasizing India-centric management strategies and their easy access to
bureaucracy so critical to effective government relations building.

5.1.b “Politically Correct” Strategy:

In the beginning, McDonald’s was faced with two challenges of the Indian market:
(1) How to avoid hurting religious sensibilities of Indian consumers; and
(2) How to avoid political confrontation with Indian government and political
activists.

McDonald’s managers were well aware of the fact that political activists can create
trouble for foreign-based fast food chains. The two local managing directors (Bakshi and
Jatia) of McDonald’s took a series of politically correct strategies to deal with the initial
challenges of the Indian market. Since India’s majority of Hindus (80% of India’s population)
revere cows as sacred and 150 million of Indian Muslims do not eat pork, beef and pork have
been a “complete no-no” from the start. Instead, McDonald’s introduced a mutton-based
“Maharaja Mac” in India, as opposed to its flagship beef-based Big Mac elsewhere.14 other
items—such as the tantalizing McAloo Tikki Burger (breaded potato and pea pattie)—were
added to the menu to lure India’s middle class. Approximately 75% of the menu available in
McDonald’s in India is Indianized and specifically designed to woo Indian customers.

5.1.c Employment Opportunity

India has come a long way from opposing the entry of MNCs to encouraging them to
expand their business operations in India. Today, every expansion move McDonald’s makes
is received well by government officials. An important reason for this shift in attitude is the
ability of the company to generate quality and long-term employment opportunities for
Indians. McDonald’s typically employs local people, and the average McDonald’s restaurant
in India employs more than 100 people in all kinds of positions- cashiers, cooks, managers,
etc. Besides, every expansion also brings additional income and employment opportunities to
India’s agricultural work force, which is very pleasing to government officials.

7
5.2 FORMULATING THE MARKETING STRATEGY:

5.2.1. Selecting the Target Market –

• Shifted from world-wide positioning of drive-in convenience and speedy-service. This


world-class strategy is the latest element of overall plan to continue revitalizing
McDonald's for customers through compelling food choices, great service and restaurant
operations, motivating value and exciting new restaurant decors.

• Segment: Each company identifies the parts of the market that it can serve best and most
profitably, which is called the segment of the market it wants to serve. Market
segmentation allows to divide a market into smaller groups of buyers with distinct needs,
characteristics, or behaviours who might require separate product or marketing mixes.
McDonalds’ identified certain segment based on its geographical and demographic
segments.

o Geographic Segmentation – Geographic segmentation calls for dividing the


market into different geographical units such as nations, regions, states, countries,
cities, or neighbourhoods. McDonalds’ India divided the country into different
zones based on directions and concentrated particularly on North and West zone
as its first market segment to attract on.

o Demographic Segmentation – Demographic segmentation divides the market into


groups based on variables such as age, gender, family size, family life cycle,
income, occupation, education, religion, race, generation, and nationality.
McDonald’s targeted different age groups from children and teens to adults upto
age less than 30 years. Like its other worldwide locations, McDonald’s targeted
children as their main clientele in India.Children are an enormously powerful
medium for relationship building in India. They not only influence markets in
terms of the parental decision-making to buy certain kinds of products, they are
also future consumers. Thus, McDonald’s has done everything possible to attract
children. McDonald’s also attracted many jean-clad teenagers, who use the outlet
as a venue to meet their friends circle, still a tricky issue among Indian middle-
class families. Income segmentation was done to attract consumers from high
income groups.

• Target: A target market consists of a set of buyers who share common needs or
characteristics that the company decides to serve. McDonald’s targeted young families
who are able to eat out, but the main focus was on to attract small childrens so that the
whole young family follows after it. The possible target market decided on was only 10%
of the India’s population. As said by Vikram Bakshi from North zone, “We want to first
concentrate on metros, then open branches in other cities. We want to setup outlet
only in cities where we can ensure the quality of products.”

McDonald’s followed concentrated marketing (or niche marketing), a market-


coverage strategy in which a firm goes after a large share of one or a few segments or
niches. Different phases to move into target markets was scheduled on –

8
o Phase I – Focus on cities of relatively high incomes where citizens are exposed to
western food and culture. High-income urban dwellers are seeking variety in their choice
of foods and are willing to spend more on international cuisine, including fast foods.
o Phase II – Move to smaller satellite towns (Gurgaon, Pune). Positive spill-over effect
of reputation from main metros. Other cities like Jaipur, Agra were also targeted to attract
foreign tourists who often visit them as favourite tourist destinations.
o Phase III – Move on to crowd pulling centers like malls, multiplexes, highways,
railway stations and airports.
o Phase IV – Introduce new low-priced products with same quality and service for
middle – class income groups of people.

5.2.2. Positioning the Offer -

“Mc Donald’s mein hai kuch baat”, a place for entire family to enjoy. Mc Donald’s
positioned for youth families.

Positioning is about communicating the unique selling advantage or proposition to the


target audience in everything the firm does i.e., marketing, sales, and customer service. The
consistency helps our customer remember. Our marketplaces have lots of choices. Too many,
perhaps, for the average consumer to evaluate logically. With hundreds of choices in any
given locale, many people simply look for a referral to a product or with professional
services: a company that their friends trust. Those who shop around consider two or three
options and take the best of the three.

With hundreds of choices, and with products and services that most consumers find
hard to differentiate, how do you set yourself, apart from the crowd? Positioning allows a
marketer to think about why a customer would want to do business with them. What do you
offer that the other producers don't? What does a potential client get by doing business with
you, which will serve their needs well?

Positioning has three components:

• What are your strengths? Your distinctive competencies? What about your offerings
provide value to your customers?
• Who is your target customer? What about makes them an ideal fit for the value you
offer?
• How are you different from your competitors in ways that your customers and
potential customers will value? In other words, what is your unique selling
proposition? Your competitive advantage?

When all three are put together, we have a positioning statement. Positioning
statements are the bases for all marketing messaging, sales scripts, and at a corporate level:
branding.

So here are the things we need to know to be able to develop your own market positioning:

9
• Who are you? As a company? As a sales rep?

• What is your firm or known for? (Ask people what they think. It may not be what
your internal talk says it is. Is it prompt claims? Or telling it like it is? Or it might just
be everyone knows you.)

• What do your customers appreciate about your products or services? (Ask your
colleagues and your customers. Again, it might not be what you think. Maybe you are
known for high quality. Or perhaps for returning calls promptly or your problem
solving ability. Maybe it is just that you are convenient. )

• What are you particularly strong at? (These are your core competencies.)

• What are you better at, than anyone else in your business? As a company? As a
professional? As a sales rep? (Quality? Innovation? Cost effective choices?)

• Who are your most satisfied customers? What is it that they value most about what
you have to offer?

• Based upon your sales goals and annual plan, who is your target market? The key here
is the fit between what you do well and who or what type of business needs what you
are good at.

• What value can you bring your customers that they will value the most, based upon
your unique strengths?

• At a company level, can you articulate this competitive value for your target, best
customers? Does your branding reflect this? Do your communications use this
messaging as its foundation?
o Are your web, collateral, and sales force attuned to this value?
o Do your services focus on this value?
o Does your customer service reflect this value?

o Does your customer service reflect the promise of the brand? Or are customers
continually shocked that the customer service is not like the brand image at
all?

Your customers are bombarded with hundreds - perhaps thousands - of commercial


messages each day. Believe it or not buying your product or service is probably not their
most important priority. So, in the end, it comes down to relationships. Does your vendor
understand your needs?

Thus, positioning is EVERYTHING, because, positioning is that unique value you


offer, to that target market you seek, in ways that are better, more effective, more amazingly
meeting your needs than any of your competitors. And, the customer service, and employee
relationships need to MATCH or be INTEGRATED with the market positioning.

10
Importance of Positioning:

Marketing strategy that aims to make a brand occupy a distinct 'position,' relative to
the competing brands, in the mind of the customer. Firms apply this strategy either by
emphasizing the distinguishing features of their brand (what it is, what it does and how, etc.)
or try to create a suitable image (inexpensive or premium, utilitarian or luxurious, entry-level
or high-end, etc.) through advertising. Once a brand is positioned, it is very difficult to
reposition it without destroying its credibility.

 Develops Brand Image.


 Creates Demand.
 Creates Value In The Mind Of Customer.
 Commands Premium Price.

5.2.3. Assembling the Marketing Mix -

Assembling the marketing mix means assembling the four P’s of marketing viz.
product, price, place, and promotion, in the best possible combination. The marketing mix
should be viewed as an integrated and coordinated package of benefits that reflect the
characteristics of customers and various targeted publics and satisfy their needs, wants, and
expectations. Note that the elements of the marketing mix should be integrated because each
element of the mix usually has some impact, direct or indirect, on the other three. For
example, if you improve the product or service you probably have to change the price
because it costs more to produce. Although you may not have to change where the product is
delivered to the customer, you will almost certainly have to change the promotion or
communication with the customer because you need to tell the customer about the changes
you have made in the product and how the changes will make it more desirable and
satisfying.

The marketing mix principles (also known as the 4 P’s.) are used by business as tools
to assist them in pursuing their objectives. The marketing mix principles are controllable
variables, which have to be carefully managed and must meet the needs of the defined target
group. The marketing mix is apart of the organizations planning process and consists of
analyzing the defined:

 How will you design, package and add value to the product? Product strategies.
 What pricing strategy is appropriate to use? Price strategies.
 Where will the firm locate? Place strategies.
 How will the firm promote its product? Promotion strategies.

11
Marketing strategies must feature customer orientation, input, and accessibility in the
fight to the top of the market. McDonald's is no different. An example of this is illustrated
with a comparison of McDonalds and Wendy's. At first glance, they may appear to have
roughly the same marketing mix and target markets. Both are fast food and provide similar
products. However, looking closer, one can recognize that McDonald's primary target market
is children ages 3-11 and their parents. McDonald's understood that the parent was making
the purchasing decision, most likely based on price.
What McDonald's marketing executives did was ingenious. They put an Rs.20 toy in
with the hamburger, French fries, and drink and gave it a special name, the "Happy Meal".
Then McDonald's marketed the Happy Meal to the kids. If you have you ever asked your
child where to buy a Happy Meal, they will tell you that there is only one place you can buy
one, and that is at McDonald's has Ronald McDonald, playgrounds or PlayPlaces, "Happy
Meals," and fun advertisements with brightly colored "Fry Guys" or the "Cheese Burgerler".
Contrastingly, Wendy's targets a more adult market and the restaurants represent a more
mature atmosphere with carpet floors and Dave Thomas advertisements. Wendy's does have
children's meals that offer a toy, but overall the atmosphere attracts a different demographic
group. McDonald's restaurants have a variety of strategies that apply to product, placement,
promotion, and price that makes them one of the most successful, well-recognized
organizations in the world.

A] Product Strategies –

Product Decision

Branding Quality Features

McDonald's marketing strategies should be looked at historically in order to see the


larger picture of the firm's success. There have been so many strategies since the inception of
the firm that it is difficult to account for them all, the two most memorable are the
development of the "Golden Arches" and "Ronald McDonald". These two icons have given
customers a mental image of what to look for when they want quality food for a low price
fast.
The firm revolutionized the fast food industry and positioned itself as the market
leader with low-priced, quality food and provided an entertaining atmosphere for the
children. These things were what that the market wanted at the time and the firm answered in
spades.

The perceived secret of McDonald's success is the willingness to innovate, even while
striving to achieve consistency in the operation of its many outlets. The vegetarian burger
menu consists of the McAloo Tikki Burger. It is a vegetable burger with potato, peas, and

12
spices, tomato, onion, and a vegetable-tomato mayonnaise.McVeggie is another Vegetarian
burger on the menu. It looks similar to the above McAloo Tikki Burger, but is made from
mixed vegetables, peas, and spices, lettuce and veg mayonnaise (referred to as Veg Sauce in
India).Another new Menu Item added is the McSurprise burger. It contains a patty, onion,
Italian mayonnaise.There is also a Pizza McPuff, consisting of a puff pastry stuffed with
peas, sliced cheese etc.

McDonald’s concentrated on studying the Indian culture, its value-systems and its
influence in food consumption decision making. It found that although a substantial
proportion of the populations were non-vegetarians, they stuck to mostly fish, mutton and
chicken. Muslim took beef but though pig meat to be dirty; Hindus preferred neither beef nor
pork; Christian took both beef and pork. McDonald’s decided, for the first time in their
business history, to drop ham and beef burger from their menu. 2 years back, they even
excluded mutton burgers from their offerings. McDonald’s developed a menu especially for
Indian with vegetarian selection to suite Indian taste. It introduced products like McTikki
Aloo for the Punjabi taste buds. McDonald’s has also re-engineered its operation to address
the special requirements of a vegetarian menu. The cheese and cold sauces used in India is
100 % vegetarian. McDonald’s are committed for giving customers wholesome, healthy, and
delicious food. They ensure that the cooking area as well as cooking equipment for
vegetarian products is visibly segregated from the non Vegetarian sections. What’s more-
their crew members cooking vegetarian food items are identifiable by their green aprons.
Franchisees agree to operate their restaurants in the "McDonald's way" but there
remains room for innovation. Many ideas for new menu items come from franchisees
responding to customer demand. To maintain consistency in the current menu while the firm
tests new products to expand the product line, McDonald's relies on test marketing new menu
items in pilot locations. New products are rigorously market tested so that the franchisee will
have a reasonable idea of its potential before it is added to the menu. The introduction of new
products, which have already been researched and tested, considerably reduces the risk for
the franchisee. The franchisees additionally benefit from the extensive national market
research programs that assess consumer attitudes and perceptions. What products do they
want to buy and at what price? How are they performing compared to their competitors?
This approach allows the firm to identify which items are likely to prove popular with
consumers while ensuring that the company can deliver new products with consistent quality
internationally. McDonald's already has a history of doing this so it will not require major
changes to its operations strategy-at least initially. If the product line-up gets too large, then
the task of maintaining quality becomes exponentially harder. The trick is to consider how to
eliminate some of the existing menu items when you introduce new ones, while making sure
the staff is fully trained in how to execute these products successfully.
Restaurant chains encounter many obstacles in maintaining their business, but the
most common obstacle is the logistical planning in getting food and supplies. McDonald's
established warehouses within a reasonable proximity to all of their restaurants to solve some
of the logistical problems it had experienced. This, along with owning the warehouses allows
the restaurants to get all of the needs met in one shipment and not deal with multiple
suppliers. Suppliers are a critical part of the value chain. McDonald's considers product
quality to be the most important aspect and sets its standards among the highest in the food
industry built. The firm's mutual effort with suppliers and franchisees to develop and improve

13
products and production techniques enables McDonald's to meet the high quality standards;
thus sharing in the growth and success of the restaurant. This growth and continued success,
and the elimination of too many intermediaries, has allowed McDonald's to pass that value
along to the customer.

B] Pricing Strategies –
Pricing is the only mix which generates a turnover for the organization. The
remaining 3p’s are the variable cost for the organization. It costs to produce and design a
product; it costs to distribute a product and costs to promote it. Price must support these
elements of the mix. Pricing is difficult and must reflect supply and demand relationship.

Penetration

Skimming

Competition
Pricing Strategies
Product Line

Bundle

Psychological

The customer's perception of value is an important determinant of the price charged.


Customers draw their own mental picture of what a product is worth. A product is more than
a physical item; it also has psychological connotations for the customer. The danger of using
low price as a marketing tool is that the customer may feel that quality is being compromised.
It is important when deciding on price to be fully aware of the brand and its integrity. A
further consequence of price reduction is that competitors match prices resulting in no extra
demand. This means the profit margin has been reduced without increasing sales.

Worldwide, McDonald’s has achieved success by tapping middle-class households.


But in India, while McDonald’s has been able to get a larger share of rich and upper-middle
class population, it has not been as successful at effectively tapping the middle-class and
lower middle-class segments. Capturing the latter segment is critical as McDonald’s starts
entering into smaller cities. But this section has mainly stayed away because of a widely
prevailed perception that McDonald’s is expensive. This is the reason why the company cut
prices on its vegetable nuggets from Rs 29 to Rs 19 and the soft service ice cream cone from
Rs 15 to Rs 7 in 1997. In September 2001, McDonald’s offered its enormously popular shudh

14
shakahari (pure vegetarian) Veg Surprise (a veggie burger) for Rs 17. With this price,
McDonald’s was able to sell the veggie burger 40% more than what it expected within a
month between September and October of 2001. In March 2004, McDonald’s launched a
Happy Price menu under which it sells four of its burger products at Rs20 each. This has led
to a 25% increase in customers. Clearly, the McDonald’s strategy has been to increase sales
volume of its products by making its products available at an affordable price.

A very popular punch line of McDonalds - “Aap ke zamane mein, baap ke zamane ka
daam”. The main reason of this price strategy was too attract the middle class & the lower
class of people in India. After this not only the upper class prefers going there but all class of
people go there. The company strives to differentiate itself from other fast food restaurants by
offering a variety of menu items that appeal to a variety of people from those who just want
great burgers, to those who just want a quick healthy meal.

Value Pricing -
√ Happy meal – Small burger ,French fries ,Coke + Toy

√ Medium Meal Combo- Burger , French fries ,Coke-Veg Rs:75 ,Maharaja Mac Meal
Rs: 95
√ Family Dines under Rs: 300

√ Prices lower than Pakistan, Sri Lanka, and 50% lower than U.S.

The most important reason for McDonald’s pricing flexibility is its well-established
supply chain arrangement, which ensures efficiency and speed in distribution. Besides, huge
increases in volume sales and food processing technology have been helping the company to
offset its cost.

15
C] Promotion Strategies –

A successful product or service means nothing unless the benefit of such a service can
be communicated clearly to the target market. An organizations promotional mix can consist
of:

Advertising

Public Relation

Sales Promotion
Promotional Mix

Personal Selling

Direct Mail

Internet/E-Commerce

The promotions aspect of the marketing mix covers all types of marketing
communications. The methods include advertising, sometimes known as 'above the line'
activity. Advertising is conducted on TV, radio, cinema, online, poster sites and in the press
(newspapers, magazines).Key objectives of advertising are to make people aware of an item,
feel positive about it and remember it. The more McDonald's knows about the people it is
serving the more it is able to communicate messages which appeal to them
Messages should gain customers' attention and keep their interest. The next stage is to
get them to want what is offered. Showing the benefits which they will obtain by taking
action, is usually sufficient. The right messages must be targeted at the right audience, using
the right media.

The Media Magic


“You Deserve a break today, so get up and get away- To McDonald’s”
The above break commercial was one of the initial commercial themes adopted by
McDonald’s United State which became the best known commercial song on television and,
in fact, the most identifiable advertising themes of all time.
Needham was one of the first advertising agencies of McDonald’s which made many
revolutionary advertisements for the company. Needham’s advertising formula became know
in McDonald’s as “Food, Folks, and Fun” and it remains the backbone of all the chain’s
advertising campaigns. McDonald’s is now, one of the world’s mightiest consumer
marketers. Its brand valuation is $25 billion, making the ninth most valuable brand in the
world.

16
Why Mudra in India?
DDB Needham and Leo Burnett are the advertising agencies of McDonald’s are
worldwide. Hence, when they came to India, The subsidiary of both the companies pitched
for the account and ‘Mudra’ the Indian partner of DDB Needham got the account. Since the
very beginning Mudra has been the advertising agency of McDonald’s India.
The Mudra team meets up with McDonald’s marketing team on a regular basis and
they have a debate and discussion on the new strategies to be adopted. McDonald’s uses
various Medias like television, hoardings and bus shelters. They are almost out of print ads.
McDonald’s also sponsor many Television Programmers like ‘Kaun Banega Crorepati’,
Children shows etc.
Even the paper Mats on the trays at the McDonald’s are designed as per the ongoing
Marketing Strategy of McDonald’s. For e.g.: During the French fries issues, all their Paper
mats had description of the burgers, how the vegetarian products are made etc, to regain the
confidence of the customers. The placing of the pamphlets, banners in and around the outlets
is decided upon by the area sales manager and the operations manager, in co-ordination with
the restaurant manager. For e.g. : currently they have the Bugs Life Theme going on wherein
they give free Bugs Life toys with the happy meal. All the outlets are decorated with the
pictures of the toys and even the paper mats have pictures of the toys on them. The hoardings
around the outlets carry the same theme.

The 80-20 Menu Boards


Even the menu counters in the outlet are a marketing tool for the company. They have
to be designed such that they catch the attention of the customer and tempt him to order the
product. So McDonald’s have menu boards that are descriptive as well as visual. They call it
the 80-20 menu board eighty percent visual and twenty percent descriptive. Under the recent
research conduct by McDonald’s they found that the consumers would have a clear
remembrance of the 80-20 Board. This board also helps give a feel of the product before it is
purchased.

Reconnecting with customers’ through contemporary global marketing direction “I’m


loving it”. “I am loving it” refers an attitude we want your employees to embrace & reflect in
their services. McDonald's sees the use of these catch phrases and the use of the Golden
Arches as a very successful way of differentiating the restaurants from other fast food
competitors. McDonald's has taken price competition out of the picture because the customer
feels they have gotten quality, convenience, service, and value - and McDonald's still makes
you feel like you are getting a break in your hectic day. Creating catch phrases are only one
kind of promotion, and McDonald's uses many kinds of promotions to keep the restaurants at
the top of the industry.
Their other 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 2nd meal in a month qualified for Opel Corsa/ NZ trip.

17
D] Placement Strategies -
McDonald's focuses on store placement and are always looking for the best locations.
This strategy created some weakness in the last 10 years because it seemed that too many
stores were put in some areas, cannibalizing sales from the other McDonald's. The company
has also made convenience a focus, not only through how fast it serves customers, but also in
the location of its outlets. Freestanding restaurants are positioned so that you are never more
than a few minutes away by foot in the city or by car in the suburbs. In addition, McDonald's
is tucking restaurants into schools, stores, and more.

Direct Distribution Indirect Distribution

Manufacturer Manufacturer

Consumer Retailer

Consumer

Logistics play a critical role in McDonald’s location strategy. As a part of its Quick
Service Restaurant (QSR) business, McDonald’s has initially decided to open its outlets only
within a 500-km radius of its main distribution centers in Delhi and Mumbai. This is the
reason why McDonald’s has not opened a single outlet in metropolitan cities like Kolkata in
the eastern part of India, despite the city’s huge urban and cosmopolitan character.

Besides Delhi and Mumbai, other places where McDonald’s has opened up
restaurants are satellite cities located near Delhi (such as Noida, Gurgaon, and Faridabad), or
Mumbai (such as Pune); places with tourist appeal (such as Jaipur, Mathura, and Shimla); and
cities with an eating-out culture (such as Ahmedabad, Chandigarh, and Bangalore). The
McDonald’s outlet in Ahmedabad in the state of Gujarat is an interesting case. Ahmedabad is
largely a vegetarian city. But, like other metropolitan Indian cities, Ahmedabad has a
significant number of eating-out customers. Given long lines of people at the counter, it
seems that McDonald’s well-balanced menus of vegetarian and non-vegetarian items has
provided enough choice and space for customers of this city.

McDonald’s has partnered with the state-owned oil company, Bharat Petroleum
Corporation Ltd. (BPCL); to set up restaurants at the latter’s petrol stations in and around
Delhi to make it more convenient for automobile-driving consumers. BPCL is the leading
petroleum retailer in India and has the largest number of petroleum stations in and around
Delhi. It is important to note the shift in government attitude toward MNC’s that led to a
successful partnership between McDonald’s and the largest state-owned company.

18
Keeping an eye on the huge potential for eating out venues for lower middle-class
Indians, McDonald’s has partnered with a railway station and bus station in Delhi to open its
outlets: Delhi Metro Rail Corporation, and the overcrowded Delhi’s Inter-State Bus
Terminus, where thousands of people pass through daily on their way to different
destinations. More importantly, to tap the automobile-driving consumers, business travelers,
and tourists, McDonald’s has set up drive-through outlets in Delhi and along national
highways. Two drive-through outlets on the Delhi-Agra and Mumbai-Pune highways have
proven to be successful. The company has plans to open more drive-through outlets in Delhi
and Mumbai and along national highways - such as the Delhi-Jaipur highway, Delhi-Ambala
highway, and Delhi-Ludhiana highway. The move to set up these new restaurants has been
driven by new business prospects, logistics, and supply chain.

In order to tap into the business of shopping mall and film-going customers,
McDonald’s has set up outlets at shopping malls and new multiplexes in metros like Delhi
and Mumbai. The success of its outlet at the Crossroads in Mumbai is evidence that a
strategic location outside a mall can bring in customers in hordes. Given the premium pricing
in the shopping mall, it is not surprising to see that many people are content with window-
shopping at the Crossroads. But they do not mind spending a few rupees at McDonald’s for a
burger or spicy fries. More important, families with children are happy to spend at least 7
rupees to buy an ice cream for their children. Thus, while most shop-owners at the mall are
hard-pressed to break even, the lines at the McDonald’s counters seem unending. A similar
trend is seen at the newly opened multiplex in Delhi’s Vikaspuri.

19
6. PHYSICAL DISTRIBUTION AND LOGISTICS
A company the size of McDonald's requires the value chain to be increasingly
important. Not only does McDonald's want to add value for the customers, but also the firm
looks for ways to improve the operations that makes McDonald's a more efficient business.
McDonald's is constantly striving to add value to the firm for their customers, and in doing
so, the firm has created efficiency in getting the products to the customers quickly and as
fresh as possible. McDonald's is constantly looking for ways to improve and is successful
because of the continuous updates on equipment, improvement on serving time, and in
finding more ways than one to satisfy customers.

McDonald's value chain is unique because of the rare need to depend upon other
companies for supplies. The firm owns nearly every portion of the value chain including
warehouses, delivery trucks, and the real estate where their restaurants built. Restaurant
chains encounter many obstacles in maintaining their business, but the most common
obstacle is the logistical planning in getting food and supplies. McDonald's established
warehouses within a reasonable proximity to all of their restaurants to solve some of the
logistical problems it had experienced. This, along with owning the warehouses allows the
restaurants to get all of the needs met in one shipment and not deal with multiple suppliers.
This, of course, does not eliminate the need for suppliers, but it has eliminated the need to
coordinate paper products deliveries with meat deliveries.

6.1 Supply Chain Management -


Another critical strategy was to set up a well-established supply chain in India in
order to achieve three objectives:

(1) To operation it’s globally practiced QSCV (quality, service, cleanliness, and value)
principle;
(2) To enjoy flexibility in pricing; and
(3) To launch a new product when necessary.

To achieve these three objectives, McDonald’s often uses an outsourcing model in all
its markets. In some cases, it also actively imports. But given India’s relatively higher import
duties and foreign exchange fluctuations, McDonald’s decided early on to source its raw
materials from the local suppliers to the maximum extent possible. Currently, McDonald’s
only imports the process control equipment that allows it to dish out burgers and other orders
within its super-fast time frames. The company, however, sources 95% of its raw materials
from 38 local suppliers.

• Fresh lettuce comes from Delhi, Pune (Maharashtra), Nainital, and Ooty (Uttar
Pradesh);
• Cheese comes from Dynamix Dairies located in Baramati (Maharashtra);
• Buns come from Cremica Industries in Phillur (Punjab) and Shah Bector and Sons in
Khopoli (Maharashtra);
• Pickles come from Global Green Company in Hyderabad (Andhra Pradesh);
• Sauce comes from Bector Foods in Phillur (Punjab); and

20
• Chicken patties, vegetable patties, pies, and pizza puffs come from Vista Processed
Foods in Taloja (Maharashtra).

The entire supply distribution is the responsibility of AFL Logistics Ltd., a joint venture
(50:50) between Airfreight and Coughlin in the U.S., and Radhakrishna Foodland (P) Ltd. in
Thane, Maharashtra. AFL is responsible for temperature controlled movement of all products
from suppliers to distribution centers.

Setting up a well-coordinated supply chain was not easy, given India’s poor
transportation and storage infrastructure, as well as its lower-quality agricultural products.
Thus, six years prior to the opening of its first restaurant in India, McDonald’s and its
international suppliers worked together with local Indian companies to develop products that
meet the rigorous quality standards McDonald’s demands. An underlying principle in product
development was to strictly adhere to the Indian government’s regulation on food, health, and
hygiene and to exceed the government’s standards. To do so, McDonald’s transferred its
state-of-the-art food processing technology to India, enabling Indian businesses to grow by
improving their ability to compete in today’s international markets.

McDonald’s has worked with local Indian suppliers to consistently improve the
quality and increase greater yields of agricultural products. For instance, it helped farmers of
Trikaya Agriculture Company to grow high-quality lettuce year round in Ooty, Pune, Delhi,
and other regions. McDonald’s shared with Trikaya advanced agricultural technology and
expertise like utilization of drip irrigation systems that reduce overall water consumption and
agricultural management practices. For quality control, Trikaya’s post-harvest facilities now
include a large cold storage facility, a cold chain consisting of a pre-cooling room to remove
field heat and large refrigerated vans with humidity controls. To ensure standardization and
higher quality, Vista International, which supplies the pies, nuggets, and vegetable and
chicken patties, built a new facility in 1996 with help from McDonald’s. This new facility has
insulated panels, temperature control, and chill rooms. Vista International has obtained
American Institute of Bakers and Hazard Analysis Critical Control Points (HACCP)
certification for quality standards.

In some cases, Indian companies like Dynamix Dairies had the technology but no
market for their milk derivative products. By associating with McDonald’s Dynamix Dairies
has seen a regularly growing expansion of its market. Now, it not only supplies products to
McDonald’s restaurants in India, but also has an export order of approximately US$12
million per year.

Radhakrishna Foodland (P) Ltd., which is responsible for getting products from
various suppliers and delivering products to various McDonald’s outlets, has earned an
excellent reputation in maintaining a tight “delivery-on-time” schedule. This is possible
because of the company’s installation of enterprise resource planning (ERP) software, which
provides data of what is selling where. This way, the company is able to anticipate demand in
each retail outlet and place orders with producers accordingly. With the help of McDonald’s,
the company has set up a trucking fleet to move supplies to restaurants at short notice. Each
of the company’s delivery trucks has three degrees of refrigeration—a freezer section for
meats, a cold refrigerator section for vegetables, and a non-refrigerated section for paper

21
cups, napkins, and plastic cutlery. These ways, each truck delivers multiple items at one go
and saves the company and restaurants a huge sum of transportation cost.

Radhakrishna Foodland distribution center also maintains high-quality standards in


cleanliness, including personal hygiene for the drivers, packing, and checking temperatures of
the food it transports to various restaurants. The company maintains detailed data logs to
track the movement of each batch of food items. In case of a complaint about a food item at
any McDonald’s restaurants, the data logs help the company to identify the batch from which
the particular food item came. Then the company issues a warning or decides to discontinue
the batch from which the food item came. This ensures a high-quality standard of food items
delivered to each McDonald’s outlet. Not surprisingly, the company has obtained American
Institute of Bakers and HACCP certification for quality standards.

Such meticulous planning in setting up a well-coordinated supply chain system has


paid rich dividends to the McDonald’s operations in India. It has minimized costs, optimized
quality control, and ensured higher customer satisfaction, which is so very essential for the
company’s growth. More critically, the improved transportation and food processing
technology seems to have served as an important catalyst for increasing India’s agricultural
productivity while raising farmers’ incomes. This has scored very well on the political front
and won the government’s goodwill.

22
7. FUTURE ANALYSIS

McDonalds’ can use following promotional techniques which should be


appropriate to be used for increasing the sales:
1. Increase its product line.

2. To have more variety to choose from, to include more deserts and more items.

3. To provide better and quick service.

4. Lower the supply chain cost so that it helps in cost reducing.

5. To expand their Happy Meal choices to attract and retain customers.

6. To educate about healthy lifestyle.

7. Introduction of cafeterias serving premium and specialty coffees and other beverages
and other products such as cakes, pastries etc in the existing McDonald’s.

8. Provide with better ambience.

9. Focus on gifts for all generations i.e. youth, kids’ especially senior citizen which is a
completely new concept.

10. Special promotions during festivals as Indians tend to spend more at such events.

11. Increasing the space for provision of birthday party areas.

12. Try to sponsor college festivals.

13. Work for social welfare of the society.

23
8. CONCLUSION

McDonald's marketing mix is strategic because of the diverse approaches that are
used. First, in identifying the "four P's" of marketing addressed earlier (product, price,
promotion, and placement), research shows that McDonald's is very careful in making
decisions that effect each area and/or how each area effects the other. McDonald's is
concerned about how the firm will fulfil the needs and wants of its customers and in the
activities associated with maintaining the relationships with its stakeholders. McDonald's
stakeholders include customers, franchisees, suppliers, employees, and the local communities
surrounding them.

McDonald's has shown care for customers through the decisions to add more healthful
foods to the menus, by changing how products are packaged or how foods are prepared, and
by philanthropic contributions and sponsorships. Local adaptation, no doubt, has contributed
to McDonald’s business growth in India. The restaurant has developed competitive
advantages in the industry of serving quality fast food at a low cost. In addition to these
decisions, the development of the Golden Arches or Ronald McDonald has provided
consumers with memorable icons that are associated with quality, service, and value, just like
the McDonald brothers and Ray Kroc intended.

McDonald's faces some difficult challenges in moving away from the fast food king
to a more health conscious provider for customers who care about what they eat. The keys to
its future success will be maintaining its core strengths-an unwavering focus on quality and
consistency-while carefully experimenting with new options. The company's environmental
efforts, while important, should not overshadow its marketing initiatives. Though there are
many opportunities for this fast food giant, McDonald's must keep the strategic nature of its
marketing efforts to stay on top and provide what customers want.

24