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ANALYSIS AND CRITICAL EVALUATION OF STRATEGY FOLLOWED BY

McDONALD'S INDIA

Research · March 2018

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 ANALYSIS AND CRITICAL EVALUATION OF STRATEGY FOLLOWED BY
McDONALD’S INDIA
BY: SANCHIT KAPOOR
B.Com, MBA (International Business)

Table of Contents: Page

1. Objective 1
2. Introduction 1–2
3. Strategic Analysis:
3.1 Strategic Environment
I. PESTEL Analysis 2–4
II. Industry Life Cycle 4
III. Porter’s Five Forces Industry-Sector Analysis 4–5
IV. Target Market, Customer Segmentation and Competitive Positioning 6
V. Market Analysis - Market Volume /Size, Growth and Market Share 6–8
VI. Competitive Analysis 8–9
3.2 Strategic Resources
I. SWOT Analysis 9 – 10
II. VRIO Framework 11
III. Value Chain Analysis 12
IV. Determining Core Competencies 12
4. McDonald’s Current Strategy & Critical Comments:
I. Current Strategy 13
II. Critical Comments 13
5. Strategic Route Forward, Recommendations & Conclusion 14
6. References 15

1. OBJECTIVE:
The objective of this report is to critically analyze and evaluate the strategic decisions that
McDonald’s India has taken since it began operations in India in 1996. This report will also list a few
recommendations that maybe beneficial for McDonald’s India to improve / gain market share or
position that it has lost, although it was one of the first fast food chains to enter India 21 years ago.

2. INTRODUCTION:

Originally founded in 1940 as a restaurant operated by brothers Maurice & Richard McDonald in
San Bernardino, California, McDonald’s was purchased by Ray Kroc and the first franchised
restaurant opened in 1955 at Del Plaines, Illinois. Today, McDonald's operates more than 37,000
outlets (80% are operated on Franchise Model and 20% are company operated) in 130 countries
and is the leader in food service retail, serving more than 58 million people globally every day. In
India, McDonald’s India Private Limited (MIPL) operates in the Food & Beverage Service Industry
and is further a part of the Quick Service Restaurant (QSR) segment. Also called fast food joints
they serve processed foods fast at low prices. Typical menu items include burgers, pizza,
milkshakes, French fries with minimal table service and provide takeaway and home delivery.
McDonald’s has been in operation in India since 1996 through its two partners:
1
 a.) Connaught Plaza Restaurants Limited (CPRL) in Northern and Eastern Region (Headquartered
in New Delhi) through a 50:50 Joint Venture (JV) &
b.) Hardcastle Restaurants Private Limited (HRPL), a subsidiary of Westlife Development Limited,
in the Western and Southern Region (Headquartered in Mumbai) which is a DL (Development
Licensee)
Westlife Development Limited is a public limited company that is listed on the Bombay Stock
Exchange (BSE). The majority stakeholder in Connaught Plaza Restaurants Limited (CPRL) is
its Managing Director, Mr. Vikram Bakshi. These two companies are the master franchisees for
McDonald’s Corporation, USA. McDonald’s motto of QSCV - Quality, Service, Cleanliness and
Value is the guiding force behind its service to customers in India. McDonald’s currently
operates 426 restaurants across India and the menu includes Burgers, Finger Foods, Wraps,
Hot & Cold Beverages and a wide range of desserts. India is the only country where
McDonald’s does not serve beef and pork products. It has more than 50 suppliers across India
from whom different ingredients are sourced. In 111 outlets in western and southern India,
McDonald’s also operates McCafe, that provides a separate space within the McDonald’s
outlet for freshly made, locally sourced coffee, pastries, cakes and cookies to customers, a
concept that is popular in Europe and USA. McDonald’s employs over 16,000 people in India.
The turnover for CPRPL for the FY 2016-17 was ₹703 crores. The turnover for HRPL for the
FY 2016-17 was ₹930.79 crores. Thus, the total turnover for McDonald’s India for the FY 2016-
17 was ₹1,633.79 crores. (approx. US$ 240 million).

3. STRATEGIC ANALYSIS:

3.1 STRATEGIC ENVIRONMENT:

I. PESTEL Analysis – Macro Environment Analysis: It is an important tool used to analyze the
macro-environment that a business is working in and is used to support strategic decision
making. As a company looks to leverage its capabilities and expand, it is essential that it
considers a PESTEL analysis to accompany the SWOT analysis.

a.) Political
• The Government of India allowed Foreign Direct Investment (FDI) of 100% for food
products manufactured or produced in India since August 2017. Earlier, FDI of 100% was
not allowed in this sector. This provides an opportunity for McDonald’s to invest more in
India.
• Since the economic reforms of 1991, the government has tried to provide a nurturing
environment for foreign companies to operate within.
• The political climate since McDonald’s began operations in India has been stable and
governments have welcomed foreign companies as they continue to create more jobs in
the country.
• There has been an increased pressure on the Ministry of Labour and Employment, India
to work on a ‘minimum wage bill’, that, if comes into effect, has the potential to affect
profitability across all spectrums of business.

b.) Economic:
• India’s Total GDP (2016-17) is US$ 2,439.01 billion which has increased by US$ 611.37 billion
since 2011-12. Although, the GDP annual growth is expected to be 6.5% (2017-18) as per World

2
 Bank estimate which is lower than 7.1% GDP as recorded in 2016-17, the Indian economy will
continue to post steady growth numbers.
• Impact of currency rate fluctuations on imports and exports.
• Disposable personal income (2016-17) stood at US$ 2,278.89 billion and consumer expenditure
at US$ 250.88 billion. These have been at their highest respective levels and are forecasted to
rise. With steady increasing disposable personal income and consumer expenditure, businesses
opportunity for McDonald’s will grow as consumers are now spending as high as 51% of their
income on food products.
• However, the inflation rate was at a 15-month high at 4.88% year-on-year in November 2017
due to increased cost of fuel and vegetables. Increasing fuel and raw material prices will pose a
threat to McDonald’s profitability.

c.) Social:
• India is demographically one of the youngest nations with around 65% below the age of 35. The
appetite of the young Indian population has been a key driver in QSR sector growth.
• Changes in customer preferences, with increasing number of people that prefer to eat out and
convenience food, will be beneficial for Quick Service Restaurant businesses like McDonald’s.
• McDonald’s has maintained religious sensitivity and has never introduced beef and pork
products in India.
• The increasing number of working women is resulting in frequent eating out occasions for
families. The Indian work-force constitutes of just over 25% women and more number of working
women are spending their disposable incomes on eating out or prepared foods picked up on the
way home from work.
• There has been a recent wave of health-conscious eating trend which is likely to affect the ‘fast
food’ business such as of McDonald’s.

d.) Technological:
• Constant increase in digital marketing through wi-fi internet access & improvements in mobile
and internet ordering platforms.
• Continuous improvement in payment and transaction times with faster machines for processing
credit/debit cards at order counters.
• Introduction of self-order kiosks that facilitate ease of ordering and paying, that McDonald’s has
introduced at a handful of its outlets.
• Improvements in kitchen equipment technology and standardization of automation.

e.) Environmental:
• Businesses in India are improving their Corporate Social Responsibility (CSR) profile and
focusing on decreasing their carbon footprint.
• New regulations for systematic waste disposal and increasing waste disposal prices will also
affect businesses in India.
• Environmental activists are advocating lower use of paper and paper products, that Quick
Service Restaurants (QSR) use in abundance to serve/pack their products in.

f.) Legal:
• India has a complex and multiple licensing system which is a hinderance to businesses with
hindering laws such as permitted operating hours and working hours for women employees.

3
 • Corporate tax rate is likely to be constant averaging just under 35% and simplification of Indirect
Taxes with the introduction of Goods & Services Tax (GST) which lowers the burden of
compliances should promote ease of doing business.
• Introduction of stricter labelling requirements on food items by the Food Safety and Standards
Authority of India (FSSAI) a few years ago, has left many food retailers/companies exposed to
attack regarding the nutritional value of their products from the media & independent food safety
organizations and McDonald’s has also felt the wrath of this backlash after their products showed
high calorie and trans-fat content.

II. Industry Life Cycle:

The Food & Beverage Service Industry is somewhere in the Growth stage whereas, the Quick
Service Restaurant segment which makes roughly 45% of the industry is also in the Growth
stage. However, growth has slowed down a little, industry rivalry is on the rise and a few
players are exiting or cutting back. An example of this is Dunkin’ Donuts that had 76 outlets in
India in 2016 and the number shrunk to 63 in 2017. All players in this industry segment have
been hit by slow growth and have had to make cut-backs.

The arrow in the above diagram shows the stage of the Industry Life Cycle of the QSR
sector in the F&B service industry, which is currently growing.

III. Porter’s Five Forces Industry-Sector Analysis:

The model was initially published in Michael Porter’s book, “Competitive Strategy: Techniques
for Analyzing Industries and Competitors” in 1980. The model identifies and analyzes five
competitive forces that shape every industry and helps determine its weaknesses and strengths.
It is widely used to determine the industry structure of a company and its corporate strategy.

4
 Bargaining
Power of
Suppliers:
LOW TO
MEDIUM

Threat of New Industry Threat of

Entrants: Substitutes:
Rivalry:
MEDIUM to MEDIUM TO
HIGH HIGH HIGH

Bargaining
Power of
Buyers:
LOW TO
MEDIUM

a.) Threat of New Entrants: MEDIUM to HIGH

Global fast food chains such as Taco Bell, Wendy’s and Burger King which are McDonald’s
closest competitors in the United States currently operate only in metropolitans and larger cities
and have a relatively lower number of outlets than McDonald’s. They have yet to expand
operations to Tier II and III cities in which McDonald’s already operates. This poses a great threat
to McDonald’s in terms of future competition. Also, Indian QSRs such as Haldiram’s,
Bikanerwala, Goli Vada Pav also plan to expand operations to Tier II & III cities which have
untapped potential.

b.) Bargaining Power of Buyers: LOW to MEDIUM

The Quick Service Restaurant Industry is largely based on low product prices and this is true for
all companies operating in this sector. However, Burger King is experimenting with a higher
pricing strategy to differentiate their ‘flame grilled’ burgers from the mass-produced ones of
McDonald’s, which poses a different threat to the industry, but for most consumers in this
industry, operating on a budget, McDonald’s operates an open pricing strategy. However,
continuous consumer demand for an ‘Indianised’ product keeps companies on their toes and this
calls for continuous product innovation.

c.) Bargaining Power of Suppliers: LOW to MEDIUM

McDonald’s spent six years (1990 to 1996) developing its supply chain. They worked with
farmers and educated them about new technologies to source the right quality of inputs,
especially for lettuce and potatoes. They also worked with global suppliers to bring international
food processing technologies to India, especially for their burger patties and tied up with local
businesses. The company also set-up its whole cold chain from scratch. Their suppliers are
many individual farmers and suppliers and for many of them McDonald’s is their only/main
customer, therefore, they have relatively low bargaining power. When it comes to supplier of
beverages, Coca-Cola has a favourable relationship with McDonald’s, however, in case of a
disruption other suppliers such as Pepsi are always available.

d.) Threat of Substitutes: MEDIUM to HIGH

Fierce competition already exists in this sector and substitute products and services
mushrooming are already evident in the market, resulting in McDonald’s losing its market share.
Imitation products are widely available but do not affect the McDonald’s brand. However, the
standardization process which is the reason for McDonald’s efficiency and profitable operating
margins, is being quickly imitated and pose a high threat.

5
 e.) Industry Rivalry: HIGH
McDonald’s operates in the Quick Service Restaurant (QSR) segment of the Food and Beverage
Service Industry and competitors such as Dunkin’ Donuts which operate in the Café segment
have introduced burgers and sandwiches in India only, which means direct competition for
McDonald’s. Starbucks and Costa Coffee are also competing with McCafe for a piece of the Café
market share. Domino’s introduced its ‘Burger Pizza’ in 2016 to cannibalize McDonald’s sales
and continues to introduce new products and offers on a regular basis and has approximately
500 more outlets than McDonald’s in India. Indian competitors such as Goli Vada Pav,
Haldiram’s, Jumbo King and Bikanerwala have successfully standardized their production
process and cater to a wider section of consumers with their purely vegetarian range of products.

IV. Target Market, Customer Segmentation and Competitive Positioning:

a) Target Market:
For McDonald’s India the target market is:

• Children.
• Young Adults.
• Young Urban Families.

b) GDPB Framework for Customer Segmentation:

• Geographic – McDonald’s focuses on urban areas covering Metropolitans across India with
presence in Tier II & III cities as well.

• Demographic - Children, Families and Young Adults (including teenagers):

Through its ‘Happy Meal’ offering which includes a toy for children, meal combos for families
and a lively environment for young adults.

• Psychographic - Convenience & Lifestyle:

McDonald’s has promoted itself as a place to relax and enjoy a tasty meal.
It has also kept in mind the eating habits of the Indian population with a wide variety of spicy
and vegetarian products in their menu. Also, the outlets have demarcated sections for
preparing vegetarian and non-vegetarian products.

• Behavioural – Occasions such as Birthday Parties:

Majority of McDonald’s outlets have a separate ‘party section’ with a special party menu that
customers can book in advance.

c) Competitive Positioning:
McDonald’s has always positioned itself in the Indian market as a ‘Family Restaurant.’
However, they introduced their low-cost, ‘Happy Price’ & ‘Happy Meal’ menu and positioned
themselves as a budget-friendly fast food restaurant chain for children and young adults.

V. Market Analysis - Market Volume /Size, Growth and Market Share:

a) Market Volume & Growth: As per a report published in 2017 by ASSOCHAM (Associated
Chambers of Commerce and Industry of India) which is an apex association of that represents
6
 interests of trade and commerce in India, that defined market volume of QSR sector based
on many factors such as:
o Expenditure on food.
o Number of times urban Indians eat out.
o Age group profile of people eating out with maximum being in the 18
to 30 years age group.
o Young Adult population in urban areas etc.

ASSOCHAM has estimated the overall market for QSR (2017) at ₹8,500 crores (approx. US$
1.25 billion)

They also estimate this figure to triple in the next five years to nearly ₹25,000 crores (approx.
US$ 3.70 billion)

This provides a Compounded Annual Growth Rate (CAGR) of:

{(25000÷8500) ^ (1÷5)} – 1 = 24.08%

Volume (INR crores)

Estimated Market Growth - QSR

30000

25000

20000

15000

10000

5000

0
2017 2018 2019 2020 2021 2022
Year

b) Market Share:
According to a report published by Grant Thornton for FICCI (Federation of Indian Chambers
of Commerce and Industry), the QSR sector (in which McDonald’s operates) that constitutes
45% of the total Indian Food & Beverage Service Industry has been a key segment and has
grown over the years.

7
 F & B Service Industry (2017)

QSR
4%
12%
Casual Dining
7%
45% Others
Cafes
32%
Fine Dining

Source: FICCI & Grant Thornton (2015)

The QSR segment has a ratio of 70:30 when comparing unorganized and organized sector.
McDonald’s has a market share of 11% in the organized sector, whereas its major rival
Domino’s Pizza has 19% of the market share.

VI. Competitive Analysis:

The major competitors for McDonald’s in India comes from Domino’s Pizza, Subway, KFC
and Goli Vada Pav. A survey done by FICCI (Federation of Indian Chambers of Commerce
and Industry) of leading QSR brands across India in 2016, by number of outlets, McDonald’s
stood at number four.
Source: FICCI & Grant Thornton (2015)

Leading QSR Brands in India (2016)

Domino's Pizza
Subway
KFC
McDonald's
Pizza Hut
Goli Vada Pav
Jumbo King
Dunkin' Donuts
Bikanerwala
Yo! China
Haldiram's

0 100 200 300 400 500 600 700 800 900 1000

Number of QSR Outlets

Criteria Domino’s Subway KFC Pizza Hut Goli Vada

Pizza Pav
Price of Products Value for money On the higher Budget friendly On the higher Most budget
offerings side offerings side friendly

Indianised Menu YES YES YES YES YES

Quality Strict Quality Good Quality Medium to High Quality has Varies from
Standards Quality known to drop outlet to outlet
Brand Value High Medium to High Medium to High Medium Low to Medium

8
 Reachability & Highest in the Second highest Walk-in and Walk-in and Walk-in only
Distribution segment with number of delivery option delivery option
fastest delivery outlets, but no
times delivery
Rate of Outlet High High Medium Low High
Addition
Initial Investment to Medium to High Low to Medium Medium to High High Low
set up Outlet
Product Innovation
to changing High Low Medium Low High
consumer tastes
Sales Growing Slowing down Growing Slowing down Growing
Profitability High Low Medium Medium High
Supply Chain Strong Strong Strong Semi-Strong Weak
Network
McDonald’s closest competitors can be analyzed as follows:

When compared with McDonald’s, its competitors possess all the essential qualities that make them
as or more attractive from a customer and business operation perspective. However, McDonald’s
leads its competitors on brand value and pricing, with McDonald’s having the most budget-friendly
menu among its competitors. Where it is lagging is in the following aspects:

• Rate of Outlet Addition and Reachability: McDonald’s is unable to add outlets in Northern &
Eastern India due to a power struggle and legal dispute relating to master franchisee issues
between MIPL (McDonald’s India Pvt. Ltd.) and Managing Director of CPRL (Connaught Plaza
Restaurants Ltd.) Mr. Vikram Bakshi (their Joint Venture partner) Whereas, in Southern and
Western India it is doing well, with a steady number of outlets opening every year.
• Product Innovation is slow, and they are unable to keep up with changing consumer tastes.
Their menu is only tweaked, and no major menu additions are being made.
• Their target market is small when compared to their biggest competitor – Domino’s Pizza.
• Investment and time required to set-up a McDonald’s outlet is relatively higher than other QSRs
because of large size and layout.
• Sales for McDonald’s India are slowing down, however, the issue is sale and operating margin
slowdown of the Northern and Eastern Indian regions compared to the Southern and Western
regions (as shown in data below).

9
3.2 STRATEGIC RESOURCES:

I. SWOT Analysis:

Strengths:
McDonald’s entered India in 1996 and since then it has established itself as a valuable brand
among Indians that serves high quality food at attractive prices while providing a children
friendly environment. They achieve such consistency in their products due to a highly efficient
and standardized food preparation process and strong supply chain. Other strengths being,
the first QSR chain to introduce self-service kiosks and free Wi-Fi. McDonald’s have separate
sections to prepare vegetarian and non-vegetarian food and all their sauces, including
mayonnaise, don’t even contain egg. Their food delivery and online order services are fast
and reliable as well.

Weaknesses: McDonald’s has been weak on product innovation, whereas competitors such
as Domino’s Pizza has been innovating and expanding their menu regularly. Also, the
‘Indianized’ burgers have largely remained unchanged in the last decade with the occasional
tweaks in sauces. They have also been slow to expand operations in upcoming cities and
many cities with a population of over one million, McDonald’s has only one outlet. Another
hinderance in its operations is the high attrition rate of approximately 20% to 25% largely due
to very low wages and managers micro-managing employees. Inability to manage increasing
operating and material costs is another weakness.

Opportunities:
The Indian economy is expected to record strong growth in the future as well which increases
GDP, GDP per capita and disposable income. Business friendly tax regimen with introduction
of GST and 100% Foreign Direct Investment (FDI) now allowed in the food sector is good
news for McDonald’s. The promising CAGR of 25% in the QSR sector, with an increase in
the expenditure on food that now constitutes 51% of the disposable income, McDonald’s
must see the vast opportunity to reach consumers it has not reached before. Also, increasing
youth population (under 35 years of age), that constitutes 65% of the total Indian population
and the target market for McDonald’s, increasing number of women in workforce which leads
to frequent eating out and ordering, changing lifestyle and eating habits with consumers open
to try foods from all over the world, preference towards Cafés (McCafe exist, but only in a few
locations) and increased family eat outs are all positives.
Threats:
The biggest threat that McDonald’s faces right now is the disruption of its business due to a
legal battle with its master franchisee in North and East India with 169 outlets in jeopardy of
closing. With shooting real estate prices, Government of India planning to introduce the
‘minimum wage bill’, cut-throat competition from local and other international brands profit
margins will be affected and negative effects of eating fast food being publicized in the media,
cause a threat to operations of McDonald’s India.

10
 STRENGTHS WEAKNESSES

• Strong Brand Value • Weak product innovation

• Consistent High Quality of Products with attractive
prices
• Children-friendly / centric environment
• Excellent Supply Chain Management
• Highly efficient and standardized food preparation
process
• Separate areas for Vegetarian and Non-Vegetarian
food preparation
• Fast and reliable food delivery service
• Introduction of self-order kiosks for customer
convenience and free-Wi-Fi
OPPORTUNITIES
• Strong economic growth
• Increasing disposable income of the middle class
• 65% of the Indian population below 35 years of age
• Increasing number of women in the workforce
• Increasing expenditure on food
• Changing life-style and food culture
• Business friendly economic and tax policies of the
Government
• High CAGR of the QSR sector
• ‘Indianized’ menu remains largely unchanged for
almost a decade
• High attrition rate among employees
• Slow expansion
• Low operating margins due to increasing
operating and material costs
THREATS
• Increasing real-estate rentals
• Increasing trend towards healthy eating
• Negative publicity about ‘fast-food’
• Impact of currency rate fluctuations
• Increasing competition from local and
international restaurant chains
• Legal battle with north and east India’s master
franchisee
• Government of India to likely introduce the
‘Minimum Wage Bill’

II. VRIO Framework:

STRENGTHS Valuable Rare Inimitable Organize to Competitive
capture value Implications
Product Pricing YES NO YES YES Sustainable
Competitive
Advantage
Supply Chain YES NO NO YES Temporary
Competitive
Advantage
Standardized YES NO YES YES Sustainable
Processes/Consistency Competitive
Advantage
Delivery/Distribution YES NO NO YES Temporary
Competitive
Advantage
Technology YES NO NO YES Temporary
Competitive
Advantage
Children Centric Menu & YES YES YES YES Sustained
Environment Competitive
Advantage
• Three of McDonald’s Resources / Capabilities give them a sustainable/sustained competitive
advantage:
➢ Product Pricing
➢ Standardized Processes and Consistency of their product
➢ Children Centric Menu and Environment

11
III. Value Chain Analysis:

a) Primary Activities:
➢ Inbound Logistics: McDonald’s generally purchases its raw materials from fixed
suppliers that must adhere to McDonald’s stringent quality standards and thus have
backward vertical integration. Coca-Cola is their supplier of beverages. They always
stay in close touch with their logistics partner for Just-in-Time (JIT) delivery to save
warehousing costs.
➢ Operations: McDonald’s India operates through its two master franchisees on a
conventional franchise model which involves franchisees paying rent and royalties on
the percentage of sales along with the payment of initial fees when opening a new
restaurant.
➢ Outbound Logistics: McDonald’s in India operate as sit-down restaurants, counter
service outlets in food courts and delivery with a few dive-throughs and have a self-
service model.
➢ Marketing & Sales: McDonald’s uses print and media advertising to communicate to
its target customer segment. It uses a broad advertising strategy to reach its target
customer.
➢ Service: McDonald’s is known for its speed of service and this efficiency is the result
of their highly efficient standardization processes. It attempts to also provide excellent
customer service.

b) Support Activities:
➢ Firm Infrastructure: McDonald’s has modern infrastructure that is at par with other
competitors. However, many of their outlets have a separate ‘Birthday Party’ section
and are generally larger in size than their competitors’.
➢ Human Resource Management: Employees must undergo rigorous training but have
the choice for flexible working hours with a secure working environment.
➢ Technology Development: McDonald’s India has upgraded their touch-screen order
and cash registers, they run customized content on LED Monitors and have introduced
self-order kiosks in some of their outlets.
➢ Procurement: One of the main factors for McDonald’s excellent supply chain
management is their electronic procurement system.

IV. Determining Core Competencies:

As McDonald’s India pursues a ‘Cost Leadership’ strategy their core competencies are:
➢ Inbound Logistics: Efficiency through backward vertical integration of supply chain.
➢ Service & Outbound Logistics which is a result of high efficiency in standardization
of processes.
➢ Capacity Utilization of their Infrastructure for driving up sales.
➢ Human Resource Management: McDonald’s India provides rigorous employee
training and wages in India are above industry standard. This is coupled with
keeping employees motivated. They follow the principle of ‘Happy Employee
equals Happy Customer.”

12
4. CURRENT STRATEGY AND CRITICAL COMMENTS

I. Current Strategy:
▪ McDonald’s India wants to create brand differentiation through cost leadership and
mildly expanding their menu offerings.
▪ Brand Reinforcement through print & media advertising via “I’m lovin’ it” campaign.
▪ McDonald’s is also pursuing the Market Penetration strategy by only consolidating and
looking to increase sales through its existing products in existing outlets.
▪ The more pro-active strategy that they are trying to implement is product development.
Adding ‘McCafe’ menu & section and Breakfast Menu in existing outlets i.e. new
products in existing outlets.

II. Critical Comments:

Positives:
▪ McDonald’s is consolidating its market share well and is in no urgent mode of
unnecessary expansion, whereas competitors such as KFC and Dunkin’ Donuts have
had to close outlets in previous years. It has the highest customer count and average
revenue per outlet when compared to its competitors.
▪ They have excellent Supply Chain Management and it helps them to increase
efficiency and cut costs.
▪ Large variety of vegetarian products with separate areas for preparation of food and
‘egg-less’ sauces attract more vegetarian customers than their competitors.
▪ Consistency in quality of their products is something that McDonald’s does better than
its competitors.
▪ Children-friendly/centric environment and ‘Happy Meal’ menu and toys with separate
sections and menu for Birthday Parties in majority outlets makes McDonald’s more
attractive to children which is their target market.
Negatives:
▪ Ongoing legal dispute between MIPL and CPRL’s Mr. Vikram Bakshi over master
franchisee issue is jeopardizing not only expansion plans but also current operation of
169 outlets in Northern & Eastern region. As the Government of India has now allowed
100% FDI in the food industry, McDonald’s needs to look for new partners after the
current dispute is settled or when their master franchisee agreement expires in 2020.
▪ Slow development of the McCafe sections in existing outlets and a result McDonald’s
is losing out in capturing market share in the Café sector as young adults now prefer
to eat out at Cafes which suit their preferences.
▪ Inability to make changes to menu and décor of outlets according to changing
customer tastes and preferences. ‘Indianised’ menu is largely unchanged since the
last decade with only tweaks in sauces and toppings.
▪ High calorie and fat content in their products, means they are losing ‘health conscious’
customers. This calls for more healthy products in their menu.
▪ High attrition rates among its employees is a cause of great concern as McDonald’s
provides its employees quality training and experience which translates to employees
leaving for a better paying job. Also, micro-management of employees (that leads to
higher attrition rate) by store managers is also a cause of concern.

13
5. STRATEGIC ROUTE FORWARD, RECOMMENDATIONS AND CONCLUSION:

▪ McDonald’s is losing its market share and Domino’s Pizza has overtaken them as it has
captured 19% share of the organized QSR market. It has done so by constantly evolving and
upgrading its menu, strategically pricing its products and adding new outlets. McDonald’s needs
to be in to touch with changing customer preferences and needs to target Tier II (population
between half & five million) & III (population less than half million) cities and strategically located
outlets. A recent step taken in this direction is by introducing its breakfast-menu, which is
something that none of its competitors currently have. But this is limited to only selected outlets
and they need to tap the potential it has.
▪ The Café sector is expanding at a high rate and McDonald’s with its ‘McCafe’ is present in only
111 locations across India. They need to speed up the process to reach more number of urban
Indians with this business model.
▪ McDonald’s has been criticized by health-conscious consumers for their overloaded calorie, fat
and sugar content in its products. McDonald’s can introduce a new menu for health-conscious
consumers that have low-calorie, fat and sugar content by making use of its strong supply chain
and global research & development facilities and by repositioning & rebranding itself to enter a
new sector in the F&B service industry. Subway has expanded in India due to this changing
customer-habit of eating healthy.
▪ McDonald’s could also use their resources to develop a menu, that features products made
from organically farmed produce.
▪ McDonald’s must also make a push by advertising more about its ‘Birthday Party’ menu and
section as it does not do so currently, which can be competitive edge over its competitors.
McDonald’s in India must make changes to its existing strategies and develop new ones to
increase their market share. By doing so, they will be able to capture most of the market share
in their sector because India as a developing nation, provides many opportunities for businesses
and McDonald’s has been operating in India for the last 21 years and they can use their market
knowledge and experience to grow even further.

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