Behind The Golden Arches

By Rahul Sengupta

The McDonald¶s Story ± Genesis
The story of McDonald¶s started in 1954, when its founder Raymond Kroc saw a hamburger stand in San Bernardino, California and envisioned a nationwide fast food chain. Kroc proved himself as a pioneer who revolutionized the American restaurant industry. Today McDonald¶s is the world¶s largest fast food chain serving 47 million customers daily. McDonald¶s is now one of the most valuable brands globally, worth more than $25 billion. The Golden Arches and its mascot Ronald McDonald have gained universal recognition. Though the company has roots in the US, McDonald¶s today has become an accepted citizen of the world. world.


‡ 1955 - Ray Kroc opens his first restaurant. McDonald¶s Corporation is created ‡ 1957 - Quality, Service, Cleanliness and Value (QSC & V) becomes company motto ‡ 1963 - Ronald McDonald makes debut ‡ 1965 - The company goes public ‡ 1968 - Big Mac is introduced ‡ 1970 ± 1600 restaurants ‡ 1974 ± Happy Meal Launched ‡ 1980 - 6000 McDonald¶s Restaurants ‡ 1996 - McDonald¶s opens in India, the 95 country

History Continued 

1994 - Kuwait City, Kuwait 2002 - Forty seven years after
± 30,000 locations ± 2000 new restaurants ± World Wide Web ± McDonald¶s a recognized Brand


McDonald¶s Mission
Be the best quick service restaurant experience. By providing quality, service, cleanliness and value that make every customer in every restaurant smile.

3 World wide strategies  Best employer  Operational Excellence  Continue to grow and be profitable .

  . the company has been able to achieve consistent product taste and quality across geographies. but also protecting its long term brand reputation. The remaining 85% is operated by franchises. Act like a retailer and think like a brand ± McDonald¶s focuses not only on delivering sales for the immediate present.Business Model  Franchise Model ± Only 15% of the total number of restaurants are owned by the Company. The company follows a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the Quality. Product Consistency ± By developing a sophisticated supplier networked operation and distribution system. Cleanliness and Value propositions offered by the company to its customers. Service.

Apart from opening outlets in the major metros. McDonald¶s India has a joint venture with Connaught Plaza Restaurants and Hard Castle Restaurants. . the company is now expanding to Tier 2 cities like Pune and Jaipur. Connaught Plaza Restaurants manages operations in North India whereas Hard Castle Restaurants operates restaurants in Western India.McDonald¶s in India  McDonald¶s entered India in 1996.

the company came up with a completely new line of vegetarian items like McVeggie burger and McAlooTikki. beef and pork burgers. language and perception. the company had to be responsive to the Indian sensitivities. lamb and fish burgers to suite the Indian palate. To survive.  . The vegetarian customer ± India has a huge population of vegetarians. To cater to this customer segment. lifestyle. The separation of vegetarian and non-vegetarian sections is maintained throughout the various stages. Most Indians are barred by religion not to consume beef or pork.McDonald¶s has continually adapted to the customer¶s tastes. So McDonald¶s came up with chicken.Challenges in Entering Indian Markets  Regiocentricism: Re-engineering the menu . value systems. Globally McDonald¶s was known for its hamburgers.

youth and the young urban family. Targeting and Positioning  McDonald¶s uses demographic segmentation strategy with age as the parameter.Segmentation. % of kids who influence what FMCG brand their family buys 80% 70% 60% 50% 40% 30% 20% 10% 0% 71% 59% 52% Biscuits Burgers & Pizzas Fruit Juices . The main target segments are children.

where children can play arcade games. This strategy is aimed at making McDonald¶s a fun place to eat.Segmentation. So to attract children McDonalds has : 1. 3. . In addition. facilities like Wi-Fi are also provided to attract students to the outlets like the one at Vile Parle in Mumbai. To target the teenagers. kids reign supreme in FMCG purchase related to food products. air hockey. µPlay Place¶ special facility . Happy Meal with which toys ranging from hot wheels to various Walt Disney characters are given (the latest in this range is the toys of the movie Madagascar). This also helps McDonald¶s to attract the young urban families wanting to spend some quality time while their children have fun at the outlet. McDonald¶s has priced several products aggressively. keeping in mind the price sensitivity of this target customer. 2. Targeting and Positioning As shown in the bar chart . etc.

When McDonald¶s entered in India it was mainly perceived as targeting the urban upper class people. Today it positions itself as an affordable place to eat without compromising on the quality of food. The outlet ambience and mild background music highlight the comfort that McDonald¶s promises in slogans like ³You deserve a Break Today´ & ³Feed your inner child´. service and hygiene.³Mc Donald¶s mein hai kuch baat´ baat´ McDonald¶s as a place for the whole family to enjoy. hygienic and relaxing atmosphere has ensured that McDonald¶s maintains a positive relationship with the customers. . This commitment of quality of food and service in a clean.

Customer responses obtained at the Vile Parle. McDonalds being an internationally renowned brand brings with it certain expectations for the customers. hygienic and a little sophisticated brand that respects their values. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customers¶ minds. a fun place to be for the children. Urban customer on the move Great taste. fulfilling some of the customer expectations like a broader product variety provide McDonald¶s a great scope for improvement. but keep it affordable. Target Segment A Family with children What is McDonald¶s for me? A treat to children. Mumbai outlet confirmed the fact that they connect strongly with the brand. The customer¶s expect the brand to enhance their self-image. Customers expect it to be an ambient. .Customer Perception and Customer Expectation Customer perception is a key factor affecting a product¶s success. quick service without affecting the work schedule Teenager Hangout with friends. However.

Promotion 5. Price 4. People 6. Product 2. each company needs to come up with an offer. Place 3. Physical Evidence .McDonalds Marketing Mix (7 P¶s) After segmenting the market. Process 7. The 7 P¶s used by McDonalds are: 1. finding the target segment and positioning itself.

manufacture the product so that it enhances the customer experience? .PRODUCT How should the company design.

. excellent customer specific product features. Product includes certain aspects such as packaging. McDonalds continuously innovates its products according to the changing preferences and tastes of its customers. Even the sauces and cheese used in India are 100% vegetarian. looks etc. McDonalds bring with it a globally reputed brand. India is the only country where McDonalds serve vegetarian menu. Mac. nonMcDonalds has intentionally kept its product depth and product width limited. The recent example is the introduction of the Chicken Maharaja Mac. guarantee. beef and mutton burgers from the menu. McDonalds studied the behaviour of the Indian customer and provided a totally different menu as compared to its International offering.PRODUCT Product is the physical product or service offered to the consumer. This includes both the tangible and the non-tangible aspects of the product and service. world class food quality and brand. It dropped ham.

S. There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. good ambience and great service. There are certain dedicated areas for children where they can play while their parents can have some quality time together. It is important so that the product is available to the customer at the right place. McDonalds offers hygienic environment. at the right time and in the right place. service. There are certain value propositions that McDonalds offer to its customers based on their needs.A is within a 3 minute drive from a McDonald¶s outlet. Nearly 50% of U. .PLACE Where should be the product be available and the role of distribution channels? The place mainly consists of the distribution channels. Now McDonalds have also started giving internet facility at their centres and they have been playing music through radio instead of the normal music. quantity.

PRICE What should be the pricing strategy? .

. meal. This is the most important part of the marketing mix as this is the only part which generates revenue. demandMcDonald¶s came up with a very catchy punch line ³Aap ke zamane mein . McDonalds has certain value pricing and bundling strategies such as happy meal. family meal etc to increase overall sales volumes. This was to attract the middle and lower class consumers and the daam´. combo meal. effect can clearly be seen in the consumer base McDonalds has now. All the other three are expenses incurred. The price must take into consideration the appropriate demand-supply equation.PRICE Pricing includes the list price. It should also take into the consideration the probable reaction from the competitor to the pricing strategy.baap ke ³Aap zamane ke daam´. the discount functions available. the financing options available etc. meal.

PROMOTION What is the suitable strategy and channels for promotion of the product? .

and Fun´ 3. media.³Aap ke zamane mein .To McDonald¶s´ 1.PROMOTION The various promotion channels being used by McDonald¶s to effectively communicate the product information are given above.baap ke zamane ke daam´. daam´. Some of the most famous marketing campaigns of McDonald¶s are: 1. Remember it.³I¶m loving it´.³I¶m . hoardings and bus shelters. so get up and get away.To make people aware of an item 2. There are three main objectives of advertising for McDonald¶s are 1.³You Deserve a break today. McDonald¶s does its promotion through television.³Food. it. 3. A clear understanding of the customer value helps decide whether the cost of promotion is worth spending. They use print ads and the television programmes are also an important marketing medium for promotion. 4.³Food. Folks. The right message has to be communicated to the right audience through the right media. 4.³You away2. Feel positive about it 3.

It understands the fact that a happy employee can serve well and result in a happy customer. Front line employees 3. This is important as it must precede external marketing. This includes hiring. Customers 2. . The level of importance has changed to be in the following order (the more important people are at the top): 1. McDonald continuously does Internal Marketing.PEOPLE How to converge the benefits of internal and external marketing? McDonald¶s understands the value of both its employees and its customers. This way they serve customers well and the final result is a happy customer. training and motivating able employees. Front line managers The punch line ³I¶m loving it´ is an attempt to show that the employees are loving ³I¶m it´ their work at McDonalds and will love to serve the customers. Middle level managers 4.

the whole process is visible to the customers. PHYSICAL EVIDENCE Mc Donalds focuses on clean and hygienic interiors of is outlets and at the same time the interiors are attractive and the fast food joint maintains a proper decorum at its joints.e.PROCESS The food manufacturing process at Mc Donalds is completely transparent i. the fast food joint allows its customers to view and judge the hygienic standards at Mc Donalds by allowing them to enter the area where the process takes place. In fact. The customers are invited to check the ingredients used in food. .

And. co- Service Delivery Process Core Product Supplementary Process . The revamped menu in India is an example of McDonald¶s strategy of integrating the customer¶s perspective in its products.The McDonald¶s Experience McDonald¶s has excelled due to its ability to successfully integrate the customer¶s perspective in its products and operations in a comprehensive manner. the operational integration is evident from McDonald¶s emphasis on its suppliers as its customers as well as its treatment of its consumers as co-producers of services.

For example. Customer Customer Service Provider Service Delivery Points .Moments Of Truth ± The Service Encounter During the Service Delivery Process. helps understand the opportunities ³Moments Truth´. these ³moments of truth´ are created for McDonald¶s every time the guard at the McDonald¶s outlet meets the customer. every time the attendant helps the customer guided the customer towards the table. every time the cashier interacts with the customer. etc. that a firm has to win or lose the customer. every time an attendant takes down the order from the customer waiting in the queue. called ³Moments of Truth´. each moment of interaction between the firm and the customer. every time the attendant cleans the table.

lower cost production and greater desire to innovate. McDonald¶s realized that the battle between fast food chains would increasingly be one of efficiency of supply. Chicken Nuggets etc. Interestingly. McDonald¶s suppliers became the focal point of new product development.McDonaldizing the Suppliers McDonald¶s has changed the nature of not only the food service industry but also the food processing industry as well. McDonald¶s also started with tiny suppliers and grew with them displaying great loyalty. . French Fries. McDonald¶s attempted to squeeze labour out of the stores by moving more preparation back into the processing plant. creating the opportunity to develop unique products based on suppliers¶ processing skills. This converted the fast-food industry¶s most fastfragmented distributed system into more efficient one which helped McDonald¶s reduce its inventory and manage costs effectively. Thus supplier technological expertise had given McDonald¶s a product which was not a mere marketing innovation but a technical one. It pioneered with innovative and sophisticated food distribution and packaging systems when the traditional food processors were unwilling or unable to supply food items that McDonald¶s demanded. Filetare results of supplier innovation. it took KFC more than three years before in finally introduced its own version of chicken nuggets. Some of McDonald¶s classic food items like Filet-o-Fish. For the first time.

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. Thus the secret lies in getting profits with different products in the different stages of the PLC. What is the fashion today may be out of market within few weeks. The introduction is timed such that the new product does not cannibalize the product already in the maturity or growth stage. . Thus continuous innovation is required.Importance of PLC in McDonalds The requirements of customers change over time and thus the product offering has to be changed accordingly.

This is used to delay the decline of a well established product which has the potential of generating further revenue. In an attempt to revitalize it. But now it was in the stage of decline and was actually not generating proper return. . 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.A perfect example of revitalising a product in decline phase The French Fries have been an important part of the McDonalds menu worldwide.

But the outlet understudy has fastParle. It is for this overall ³Food. Pizza Hut²the firm encounters new challenges. expectations and perception of different market segments. McDonald¶s has anticipated these changes to maintain its competitive edge. McDonald¶s has Wi-Fi enabled the outlet to Wicater to the student community. Keeping in mind the demographics of the area. . a new critical success factor may be emerging: the need to create a rich. other competitors eating away into its market share. In addition to its traditional rivals² rivals² KFC.Competitors Analysis McDonald¶s has been a leading fast-foods outlet in Vile Parle. satisfying experience for consumers. The new McBreakfast would be introduced between 6 to 11 am as a pilot project. inducing firms to revise their products portfolios and to revisit their product market to understand changing needs. At this time. This would open up a whole new revenue stream for McDonald¶s by tapping into the student and working population by providing a healthy and wholesome breakfast. back-totimeOn the higher end. the KFC has become potent competitor in the quick service field. Dominos. Competition also reduces product lifecycle. Fun & Folks´ experience that customers pay a premium over the other competitors. fast. This shows how demographic shift can affect the demand for products and services. taking away customers from McDonald¶s. convenient service is no longer enough to distinguish the firm. Perhaps in the new environment. This brings us to service and experience based competition which McDonald¶s can use for competitive advantage against Jumbo King. Jumbo King competes Hut² using a back-to-basics approach of quickly serving up burgers for time-pressed consumers.

Two Dimensional Perceptual Mapping .

SWOT Analysis .

it available at the Vile Parle outlet. the company is now expanding to Tier 2 cities like Pune and Jaipur. The company views this category as a key growth driver in future. In Mumbai. the company has recently launched its entry into the breakfast food category. With the customer demographics constantly changing and tectonic social and cultural shifts being observed in Tier 2 and Tier 3 cities due to globalization.The Road Ahead  Entry to Tier 2 and Tier 3 cities ± The main target customer for McDonald¶s is the new urban Indian family. This is now launched on a pilot basis on select stores. Rolling out McBreakfast across all outlets ± In India.  .

Exhibits Vegetarian McVeggie McAlooTikki Paneer Salsa Wrap Crispy Chinese McCurry Pan Pizza McPuff Non Vegetarian Chicken Maharaja Mac McChicken Burger Shahi Chicken McCurry Wrap Chicken Mexican Fillet-O-Fish Vegetarian Menu NonNon-Vegetarian Menu .

Is the product line in McDonald¶s adequate? Favourite Product MAHARAJ MAC MC CHICKEN BURGER 18% MC VEGGIE BURGER FRENCH FRIES 12% MC CURRY PAN FILETO FISH 34% OTHERS Is the product line adequate? 10% 8% 6% 28% 38% YES NO AVERAGE 12% 34% .Survey Results Q. Which is your favourite product at McDonald¶s? Q.

Which area do you think needs the most improvement? Problems Faced in McDonald's Improvement Required Delivery Time Long Queues 24% 40% 4% Other 16% No Problem 16% Rude Behavior of Employees Congestion 20% 10% 10% 6% Capaciousness Product Variety Prices 30% Offers and discounts 24% Others . What is the main problem you faced at McDonald¶s? Q.Survey Results Q.

What is the first thing that strikes your mind about McDonald¶s? First Thing About McDonald's That Strikes Customer's mind 22% 30% 4% Burger Golden Arches Service Value for Money 18% 26% Fun .Survey Results Q.




Army ent  Provides career opportunities Process  Service Enhancement Process  Consistent  Consistent through CD-ROMs through CDROMs opportunit ies Training  Service Enhancem  Surpasses even the U.

 More than 40.000 older workers serve McDonald¶s customers on any given day .  Flexible scheduling so as not to jeopardize their Social Security benefits.ReHIREment  Program established for mature workers  Ease of transition of older workers returning to the workforce.

McJobs  Assistance to employees with mental and physical disabilities.  Given formal graduation ceremony .  More than 9.000 workers went through the program.

Management Development Programs  Crew Development  Restaurant Management  Mid-Management  Executive Development .

Hamburger University      Management Training Center Worldwide Education Program Technology 200 per class 65.000 managers graduated to date .

Women and Minorities  Soars above stereotype of average fast-food joint  Compose more than 50 percent of McDonald¶s current workforce  Featured as the ³The Best Companies for Minorities´ .

Technology  McDonald¶s in Sweden ± World¶s First Snowmobile Drive-Thru & ExxonMobil??? ± Speed pass invades McDonald¶s  McDonald¶s .

Financial Agenda ‡ ‡ ‡ ‡ ‡ System Wide Sales McDonald¶s Corporation Revenues Cash Flow Financial Ratios Stock Performance .

System Wide Sales In The Year 2000 $40.181 Billion Affiliated 13% Company operated Resturants 26% Franchised 61% .

McDonald¶s Corporation Sales By Segment Other 9% Latin America 7% Asia/Pacific 14% U.S. 37% Europe 33% .

44 $1.42 1 '98 '99 '00 '98 '99 '00 '98 '99 '00 .Income (in millions) Net Revenues $14.24 3 $13.977 Net Income Earnings / Share $1.947 $1.25 9 $1.14 $12.49 $1.550 $1.

7) $2.Cash Flow Statement In (millions) 2000 1999 Net Income Net Cash Provided By Operating Activities Net Cash Provided By Investing Activities Net Cash Provided By Financing Activities Cash and equivalents increase(decrease) Cash and equivalents at beginning of year Cash and Equivalents at end of year $1.212.751.977.261.3 $2.3 $299.6) (536.2 $419.008.5 $421.5 (2.8) (626.9 3.7 $1.947.2 $419.5 .8) $120.9 (2.

54 8.Financial Ratios Analysis P/E Ratio Price to Sales Price to Book Quick atio McDonald 21.49 1.36 3.65 77.44 0.52 0.67 10.42 2.28 0.01 7.30 17.76 109.289 Inventory Turnover Total Debt to Equity Net Profit Margin eturn on Assets eturn on Investment eturn on Equity evenue/Employee .95 0.54 17.62 8.63 32.62 40.89 11.852 Industry 25.64 7.97 3.

00 Last Trade Mar. 8 27.877B 52-wk Range 24.91 .Stock Performance Mkt Cap 35.31.75 .

Social Commitments  ³9-11´ Relief Effort  Environmental Concerns  Educational Involvement  Quality & Safety Procedures  Ronald McDonald House Charities (RHMC) .

Making A Difference We have an obligation to give back to the communities that give us so much." . 1955 THANK YOU .Founder Ray Kroc.

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