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Global Marketing Strategies

of McDonalds

We are lovin’ it !
Table of Contents

S.No Content

1. Introduction

1.1 Environmental Analysis


• Global Fast Food Industry
• Survey Findings
• Porters Five Forces Model – The Fast Food Industry

1.2Company Profile
• McDonalds Back Ground
• McDonalds India
• McDonalds Business Model

1.3 Company Strategies


• Internationalize Business
• Country Market Selection
• Market Entry Selection
• EPRG Approach
• Segmentation

2. Objectives and scope

3. Limitations

4. Theoretical perspective-7P’s

• Positioning
• Product
• Price
• Place
• Promotion
• People
• Processes

5. Research methodology

6. Research Analysis and findings

7. Recommendations

8. Conclusion
9. Executive Summary
10. Bibliography
11. Annexure
Environmental
Analysis
The Global Fast Food Industry
The fast food business has become ever more competitive, with various multinational fast food
chain operators expanding into new geographies daily, along with the emergence of new
players, new types of cuisines and new menu choices.

Players: - McDonalds, Burger king, Subway, Wimpy, Pizza hut etc

With fast food operators introducing healthier options in the form of salads and low carb meals
- in the face of growing concerns for rising obesity levels - consumers today have greater
choice than ever before.

Some Recent Trends

It doesn’t matter where in the world an individual is (or how well off), the fast food culture has
become a way of life for all. According to the latest findings from A C Nielsen, nearly all
Filipino (99%), Taiwanese and Malaysian (98%) adults eat at take-away restaurants, according
to a new study from A C Nielsen, a leading provider of consumer and marketplace
information. Among the 28 markets studied across three regions, consumers in these three
markets had a higher percentage of adults than Americans (97%) who eat at fast food
restaurants.

The latest A C Nielsen Consumer Confidence and Opinion Survey was conducted in October
over the Internet in 28 countries across Asia Pacific, Europe and the US interviewing more
than 14,100 consumers over the Internet.
Asians - The World’s Greatest Fast Food Fans

Top 10 Global Markets for Weekly Fast Food Market Percentage of Adult Population That
Consumption Eats at Take-Away Restaurants at Least Once
a Week
Hong Kong 61%
Malaysia 59%
Philippines 54%
Singapore 50%
Thailand 44%
China 41%
India 37%
U.S. 35%
Australia 30%
New Zealand 29%

Survey Findings
Adult polulation eating at take away
restaurant atleast once a week
70%
60%
50%
40% Series1
%

30%
20%
10%
0%

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Country
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Resistance to take away lifestyle

20
15
%

10 Series1
5
0
Asians Europeans
Region
% of respondents
Take away dinner

in favour 100
95
Series1
90
85

vietnam
australia

zealand
usa

new
Country

Take away breakfast


% of respondents

72
in favour

70
68
Series1
66
64
62
Malaysia Hong Kong Thailand
Country
Porters Five Forces Model – The Fast
Food Industry

Threat of New Entrants

In the recent years Global Fast-food market has shown tremendous results and the growing
demand for fast food has been attracting many players. Market is full with players like
McDonald’s, Wendy’s, Burger King, Subway, Pizza hut, KFC, and many other local players.
Few other players are also looking to extract profit from this market. Even few local players
are also looking to enter into the global arena. For example Burger King is planning to enter
into the Indian market. These new comers are expected to radically alter the industry structure
with their technology. The reasons for upcoming of new entrants are:
 Market is reasonably attractive.
 Entry barriers are not very strong.
 Diversification

Therefore, the competition in the Global Fast food market is heating up. This implies that the
threat posed by new entrants will be very strong.

Bargaining Power of Customers

In the Global Fast food segment the bargaining power of customer is very strong as a result
many big players are working on the perceived value based pricing therefore the price level is
reasonably adequate. Yet customers are price sensitive especially in the Asian countries. In the
industry the alternatives are easily available as a result customers are in a position to excise
much bargaining power.

The customers are always given more value for their money either in form of Happy hours or
combo meal from McDonald’s, Buy one get one free from Pizza Hut, or free gift from the
outlets; they enjoy heavy discounts on their purchases with more value for their money.

Bargaining Power of Suppliers


In the Fast food industry the major supplier are - regional suppliers of vegetables, milk product
and chicken. They excercise clout in the industry.
Given McDonalds endeavour to develop exclusive supply chains in countries across the globe,
the bargaining power of the suppliers is bound to grow. Since the suppliers are aware of
stringent quality standards, extremely specific input requirements followed by McDonalds,
they know that McDonalds cannot afford to change their suppliers too often. This absence of
competition gives the suppliers an upper hand.

Rivalry among Current Players


 McDonald’s
 Wendys
 Burger King
 Subway
 Pizza hut
 KFC
 Others (Small local players)

These players are continuously looking to expand their market share.


Top five burger restaurants per market share (Source: Ad Age):

Rank Company Market Share


1 McDonald's 43.1 %
2 Burger King 21.1 %
3 Wendy's 12.7 %
4 Hardees 5.3 %
5 Jack in the Box 4.4 %

In addition to traditional rivals—Burger King, Wendy’s, and Taco Bell—the industry


encountered new challenges. Sonic and Rally’s competed using a back-to-basics approach of
quickly serving up burgers, just burgers, for time-pressed consumers. On the higher end, Olive
Garden and Chili’s had become potent competitors in the quick service field, taking dollars
away from McDonald’s, which was firmly entrenched in the fast-food arena and hadn’t done
anything with its dinner menus to accommodate families looking for a more upscale dining
experience.
Threat from Substitutes

Major threat to Global fast food industry is from regional players in unorganized segment
because these small players are tapping a large share of the segment. Even local restaurant
outlets are making a dent to their market share. This category has posed the major threats to
the industry by providing good quality food in congenial environment at an attractive price
level. It serves the purpose of both food and entertainment and at the same time they provide
more value for consumer’s money. Recent years have witnessed a spurt in the number of local
restaurant outlets in almost every country.
Company

Profile
McDonald’s Background
Two brothers, Richard and Maurice McDonald founded McDonald’s in 1937. The brothers
developed food processing and assembly line techniques at a tiny drive-in restaurant east of
Pasadena, California. In 1954, Ray Kroc, a milk-shake mixer salesman, saw an opportunity in
this market and negotiated a franchise deal giving him exclusive rights to franchise
McDonald’s in the USA. Mr. Kroc offered a McDonald’s franchise for $950 at a time when
other franchising companies sold restaurant and ice-cream franchises for up to $50,000. Mr
Kroc also took a service fee of 1.9 per cent of sales for himself plus a royalty of 0.5 per cent of
sales went to the McDonald brothers. The McDonald’s brothers sold out for $2.7 million in
1961. Kroc was somewhat of an obsessive individual, fixated with rules, regulations,
procedures, and obedience to his strict rules of discipline. Kroc was especially concerned with
maintaining McDonald's clean image, as well as that of life in general, and could regularly be
seen picking up litter outside of his restaurants in order to maintain the high standard of
cleanliness upon which many of his principles were based. During the 1960s, McDonald’s
invested a great deal of capital into advertising and marketing campaigns.

In 1962, the golden arches were adopted as its corporate logo, with the introduction of Ronald
McDonald as its mascot arriving the following year. In 1965, McDonald’s Corporation went
public, and by 1966 was listed on the New York Stock Exchange. In 1967, its first restaurants
outside of the United States were opened in Canada and Puerto Rico. 1968 saw the
introduction of the company’s flagship product, the Big Mac. Throughout the 1970’s,
McDonald’s became involved with a lot of charity work, establishing its own charity called the
Ronald McDonald House, providing temporary housing for the families of seriously ill
children. Kroc had always believed in giving something back to the community in order to
make the world a better place. In 1973, McDonald’s added breakfast items to its menu. The
Quarter Pounder was introduced in the subsequent year, as sales reached $1 billion. 1974 saw
the opening of the first restaurant in the UK, in Woolwich, South London. In 1975,
McDonald’s introduced “drive-thru” window service, which allowed motorists to order and
receive food from their cars. Nowadays, this type of business accounts for around half of all
McDonald’s sales in the United States. In 1983, Chicken McNuggets were added to the menu,
giving customers an alternative to beef. Founder Ray Kroc died in 1984.

Ronald McDonald Children’s Charities was founded in his remembrance to raise funds in
support of child welfare. In 1989, McDonald's became listed on the Frankfurt, Munich, Paris,
and Tokyo stock exchanges. Through the
990s smaller outlets known as “Express” stores were opened in hospitals, zoos, airports, and
even on ferries. These outlets served a limited menu and lacked some of the amenities of larger
stores. In 1996, McDonalds signed a 10-year agreement with The Walt Disney Company. This
agreement has led to the introduction of restaurants at Disney theme parks, and the promotion
of Disney films through McDonald's. Packaging is the primary source of advertising, along
with the addition of limited edition products added to the menu. Examples include Pocahontas
and The Lion King.

McDonald’s first international venture was in Canada, during 1967. Shortly afterwards,
George Cohon bought the licence for McDonald’s in eastern Canada, opening his first
restaurant in 1968. Cohon went on to build a network of 640 restaurants, making McDonald’s
in Canada more lucrative than any of the otherMcDonald’s outside the USA.

The key to the international success of McDonald’s has been the use of franchising. By
franchising to local people, the delivery and interpretation of what might be seen as US brand
culture are automatically translated by the local people in terms of both product and service.
McDonald’s now has over 20,000 restaurants in over 100 countries, and around 80 per cent are
franchises.
McDonalds India
McDonald’s India, a locally owned company is managed by two Joint Ventures, one in the
North, Connaught Plaza Restaurants Pvt. Ltd. run by the Joint Venture Partner Mr. Vikram
Bakshi the other in the Western Region, Hard Castle Restaurant Pvt. Ltd. managed by the Joint
Venture Partner Mr. Amit Jatia. At present there are 34 restaurants and 3 food courts in the
Northern Region - Delhi (23) Noida (3) Faridabad (1) Gurgaon (3) Jaipur (2) Mathura (1)
Ludhiana (1) Lucknow (1) and Chandigarh (1). There are 20 restaurants in the Western Region
in Mumbai, Pune, Ahmedabad and Vadodra.

In the past eight years Mcdonalds has a number of firsts to its credit:

1996 …the first McDonald’s restaurant opened on Oct. 13, at Basant Lok, Vasant vihar,
New Delhi. It was also the first restaurant in the world not serving beef on its menu

1997…the first Drive –Thru restaurant at Noida


1999…the first Mall location restaurant at Ansal Plaza – New Delhi
2000…the first highway restaurant at Mathura
2001…the first thematic restaurant at Connaught Place
2002…the first restaurant in a food court at 3C’s, Lajpat Nagar and the first restaurant at the
Delhi Metro Station at Inter State Bus Terminus

2003….the first Dessert kiosk,Faridabad(Harayana)

McDonald’s Role in the Indian Economic Growth

McDonalds India has already contributed directly & indirectly Rs. 95 Crore (approx. 16 per
cent of total turnover) as revenue to the Center and the State towards Sales Tax, House tax and
Income Tax in the last seven years. By 2005 this amount shall see an increase of more than 30
per cent per annum.

McDonalds Business Model

McDonalds spread its wings beyond USA primarily for the following reasons:
 To have larger customer base.
 To reduce the dependency on the American market (the company had been facing
some criticism regarding the nutritious value of their products).
 Foreign markets present higher profit opportunity then the domestic market.
 To counter attack the competitors in their own market by making a global presence.

McDonald’s global strategy can be summarized as “strict quality and consistency standards,
innovation and continuous development, central promotional campaign and adaptability to
local environments.”

The McDonald’s model produced stunning annual average revenue growth of 24 percent from
1965 to 1991. The company increasingly turned overseas in the 1990s, opening 2,000
restaurants globally in 1996, the peak year of expansion.

One of the unique features of McDonald’s business model is that it extracts huge revenues
from the real estate business, unlike its competitors McDonald’s owns many of its outlets and
collects rent for their use.

Over the years McDonald’s has diversified their restaurant interests by operating fast food
chains under other brand names such as Aroma Café, Boston Market, Chipotle Maxican Grill,
Donatos Pizza and Pret A Manager.
Global Marketing
Identify International Explore Resources Use Core
Opportunities and Capabilities Competence
International
Strategies Modes of Entry

Increased market International Exporting


size business-level Licensing
Return on strategy Strategic
investment Multidomestic alliances
Economies of strategy Acquisitions
scale and learning Global strategy Establishment of
Advantage in Transnational a new subsidiary
location strategy

Global marketing steps can be broadly into:

• Internationalize Business
• Country Market Selection
• Market Entry Selection
• Global Marketing Decisions
Internationalize Business
Firstly, the firm needs to decide why and to whether it should extend its operation across its
frontiers and what would be the revenues accruing thereof. There are both pros and cons in
extending the firms operations. Some of them are:

DRIVING FORCES RESTRAINING FORCES

Technology Culture
Culture Market Differences
Market Needs Costs
Cost National Controls
Free Markets Nationalism
Economic Integration War
Peace Management Myopia
Management Vision Organization History
Strategic Intent Domestic Focus
Global Strategy and
Action

Operational Considerations
Strategy Advantages Disadvantages
Global Exploit experience curve Lack of local responsiveness
Exploit location economies
Multi-Domestic Customized products No location economies
No experience curve effect
No transfer of core
competencies
International Transfer distinctive Lack of local responsiveness
competencies No location economies
No experience curve effect

Transnational Exploit experience curve Difficult to implement


Exploit location economies
Customized products
Global learning
Country Market Selection
Once the company decides on going global it must then think as to which country to go to. For
this it weighs the attractiveness of the country along with the competency of the firm, resulting
in a matrix as shown below;

While deciding on the country to enter, the firm also gives weightage to the risks involved in
each country- both political and economic risks, in proportion to the opportunity available for
them. This results in an “Opportunity-Risk Matrix” as shown below;
Market Entry Selection
After selecting the country, the firm must decide as to in what form it would enter the country.
The various forms of entry are as follows:

Contractual Agreements

Licensing Franchising

Strategic Joint
Alliances Ventures
)

Then again the firm decides as to in which mode it should enter the country.

Poly

Ethno

1) Ethnocentric Orientation
• Characteristic of domestic & international companies
• Regio outside the home market
Opportunities Geoare pursued by extending various
elements of the marketing mix
Home country marketing practices will succeed elsewhere without adaptation;
international marketing is viewed as secondary to domestic operations

2) Polycentric Orientation
• Characteristic of multinational companies
• Marketing mix is adapted by autonomous country managers

Management of these multinational firms place importance on international


operations as a source for profits. Management believes that each country is
unique and allows each to develop own marketing strategies locally

3) Regiocentric or Geocentric Orientation


• Characteristic of global / transnational companies
• Marketing opportunities are pursued by both extension & adaptation
strategies in global markets

Regiocentric and Geocentric are synonymous with a Global Marketing


Orientation where a company strives to develop integrated market strategies
for several countries, countries in a region, or the entire world

To summarize the various strategies,


Inter
Strategy Costs of Philosophy
-
dependence Control

Global High High Ethnocentric

Multi-Domestic Low Low Polycentric

International Moderate Moderate Regiocentric

Transnational Very high Very high Geocentric

EPRG APPROACH – THE


MCDONALDS CASE
1. Management – Polycentric + Geocentric

Local people are handling the management, therefore McDonalds has adopted a
polycentric approach. However, at the same time, the top level management comprises
of people from the home country.

2. Promotion – Polycentric + Geocentric

The “ I’m lovin’ it “ campaign is a geocentric approach because it is a common


thread of promotion which is running across the world by only giving it a little local
flavour ( country specific ) . It is adapted to the requirements of a particular nation .

3. Product – Polycentric

The menu has been adapted and moulded to suit the local needs. In some countries
the adaptation is to such a large extent that it has led to major changes in the product
or has changed the product completely.
For e.g. – In Japan McDonalds is serving noodles , Soup in China , McAloo tikki
burger and Paneer salasa in India are examples of their polycentric approach.

4. Research – Polycentric

A company will not enter into a market where there is no demand for fast food
products. It is also important to understand that each market is different and unique in
its own way. This makes it extremely important to undertake country specific research
before launching commercial operations in a market.
The data obtained in the A C Nielson Consumer Survey (Recent Trends) points to the
diversity in consumer opinion, perception and purchase behavior which a fast food
company like McDonald’s must take into account before deciding upon entering a
market.

5. Planning –
Golden Arches / Ronald

I’m lovin’ it [Geocentric: change of language and colour]

Polycentric [Adapted them to the local needs i.e. the


representation of the slogan]

I’m lovin it campaign in India shows a lady cleaner with the duplicates of Devanand, Dilip
Kumar and so on.

Toh Aaj McDonalds ho jaye.

McDonalds mein hai kuch baat.

I’m lovin’ it .

Segmentation
Segmentation variables include geography (region of the country, country size, city size),
demographics (age, gender, family size, income, education), psychographic factors (lifestyle,
social class, personality) and behavioral characteristics (benefit sought, attitude toward
product, user rate, user loyalty). However, it is important to understand that all these factors do
not enjoy the same status. Rather segmentation analysis begins with an assessment of usage.
Demographic correlates of usage are then used to make a segmentation strategy actionable.
Other factors, such as benefits sought can be introduced to enrich the strategy developed, but
they generally do not constitute a primary basis for segmentation.

Market segmentation is a vital step in the marketing planning process; Segmentation involves
subdividing markets, channels or customers into groups with different needs, to deliver
tailored propositions which meet these needs as precisely as possible. The main aim of market
segmentation is to enable a company to target its effort on the most promising opportunities,
and to find a way of differentiating itself from the competition.

Need For Segmentation:


Segmentation needs to be undertaken for the following reasons:

• Better serving customers needs and wants


• Higher Profits
• Opportunities for Growth
• Sustainable customer relationships in all phases of customer life cycle
• Targeted communication
• Stimulating Innovation
• Higher Market Shares
For segmentation to be effective, the following criteria should be kept in mind:

Feasibility: Having in place a marketing program for each segment and drawing advantages
from that.

Distinguishing ability: Market segments have to be diverse enough to show different


reactions to different marketing mixes.

Accessibility: The segment has to be accessible and servable for the organization.
Relevance: The size and profit potential of a market segment have to be large enough to
economically justify separate marketing activities for this segment.

Measurability: It has to be possible to determine the values of the variables used for
segmentation with justifiable efforts.
A company can segment its market on different basis/characteristics. Some of them are as
follows:

Behavioural segmentation
Behavioural segmentation divides customers into groups based on the way they respond to,
use or know of a product.

Benefit segmentation
Benefit segmentation relates to the process of dividing a market based on the specific benefits
consumers seek from a product.

For example,
Some McDonalds customers look for lower prices, some for taste, some want variety. The
firm, therefore, has to decide which benefits to offer – and how these benefits should be
communicated to the customer

Demographic segmentation
Demographic segmentation consists of dividing the market into groups based on variables
such as age, gender family size, income, occupation, education, religion, race and nationality.

McDonalds segments its market on the basis of age groups and offers unique products to
‘delight’ consumers in each segment.
E.g.: ‘Happy Meals’ for children and ‘Egg McMuffin’ for the elderly.

Gender segmentation
The segmentation of markets based on the sex of the customer. The cosmetic industry is a
good example of widespread use of gender segmentation

Geographic segmentation
Geographic segmentation divides markets into different geographical Units.( region of the
country, country size, city size )

Lifestyle segmentation
Lifestyle segmentation of a market is based on identifying lifestyle characteristics of customers
that enable target customer groups to be identified. Many businesses now segment their
markets by lifestyles, as these are increasingly seen as good predictors of consumer behavior.
Most companies use off-the-shelf research-agency classifications (such as the Target Group
Index), because of the high cost and complexity of developing their own.

Occasion segmentation
A basis of segmenting a market based on occasions when buyers get the idea to make a
purchase, actually buy, or use a purchased item.

Psychographic segmentation
Psychographic (or “lifestyle”) segmentation seeks to classify people accordingly to their
values, opinions, personality characteristics and interests.

McDonalds has also introduced a number of products to cater to segments according to their
different values. E.g.: It offers regular hamburger for vegetarians and or the ‘health conscious’
that tastes like the real thing but is made of plant material like Soya beans (low on calories as
well).

McDonalds also uses a combination of demographic and psychographic segmentation to


divide its target market and cater specifically to the middle and the working class. This is
because these are the people that are more susceptible to enter a fast food restaurant, since they
lead a fast moving life and thus require a fast meal.
Objectives
And
Scope
Objectives

1)Study of Global Marketing Strategies of


McDonald’s

2)McDonald’s – The Indian Case

3)Evaluation of overall customer satisfaction of


foreign tourists in Delhi vis-à-vis that in their
respective home countries.
The main objective of the market research is to study: -

The Consumer Perception towards


McDonald’s Vis – a – Vis in their home
country and India.

Objectives of the research study include

 Perception about McDonalds.


 Factors influencing choice of a Fast food restaurant.
 Which Fast food restaurant considered as “The Best” (based on perception and satisfaction
level) in the global scenario.
LIMITATIONS
Limitations
The complete depiction of scenario of Global Fast food market was not possible due to various
limitations which are:

 Sample size was too small as compared to the huge global market of fast food.

 Unability to cover the whole segment due to lack of time and experience. Respondents are
from limited countries.
Sample size = 50
 Uncovered Area: - Unorganized fast food market of the world
7 P’s
Positioning

“How a product differs from its competitors”

In the words of Philip Kotler, positioning is “The act of designing the company’s offering and
image to occupy distinctive place in the minds of target market”. Positioning reflects the
"place" a product occupies in a market or segment. Every product has some sort of position —
whether intended or not. Positions are based upon consumer perceptions, which may or may
not reflect reality. A position is effectively built by communicating a consistent message to
consumers about the product and where it fits into the market — through advertising, brand
name, and packaging. A successful position has characteristics that are both differentiating and
important to consumers. In case of McDonald’s the word target market varies from market to
market or from country to country.

The company has positioned itself as the good quick bite experience in terms of quality as
compared to the other players but the problem lies with perception of customers. This tells that
consumer perception is more important than actual product offerings. McDonald's Restaurants
which were once known only for its burgers today carry a different association in the minds of
people: - hamburgers, fun, children, fast food and golden arches.

Positioning For Success: Who Are You and What Are You Trying To Do?

Positioning begins with establishing an identity. The concept is easily understood when you
look at examples. McDonalds and Bellisio's (fast food chain) have created two very different
identities in the Duluth fast food market. Each has targeted a different consumer niche.
McDonalds is fast food with no surprises, the same burgers that you get it in Ohio or
Michigan or South Carolina. By way of contrast, from the wine racks to the menu selection
Bellisio's speaks to a different class of consumer.
Positioning is more than branding. When you think of McDonalds you not only have golden
arches in your head, but you have a product and experience as well. Getting the name
Bellisio's into the market means nothing unless there is also an association made with the
identity.

According to AcNielsen market survey in 2003 showed that McDonald's was perceived by
consumers as a provider of very good children's burgers, while the product was perceived as
somewhat lower in quality in the adult burger market. As a result, McDonald's introduced the
Arch Deluxe, a more "sophisticated" burger, and invested in an extensive media campaign to
position this new product in the market.

Another positional problem that McDonald's faces is that the restaurant chain is perceived as a
lunch time eating place, and not as much as a place to have dinner. Since much wasted
capacity exists in the evening, McDonald's has tried a number of tricks to get consumers to
come in. They have experimented in some locations, for example, by expanding the menu to
include choices such as pizza. Burger King, a competitor, tried in some locations to go a bit
more upscale by offering a more sophisticated dinner menu, with orders being taken and
served by waiters at the table. Generally, these efforts have not helped much.

"Advertising does help in positioning the product in the market, but advertising alone
does not sustain a brand" -Vikram Bakshi, MD McDonald's

In India McDonald's is known as a family restaurant. They believe that they are here to make
their customers feel at home and enjoy their time out with their family when they are at
McDonald's. Extra care has been taken to make their restaurants child friendly, by providing
play areas wherever possible so that the parents can relax and have a good time when they are
visiting McDonald's. This shows that the McDonalds have distinctively positioned itself in the
Indian market.
Positioning Strategies

In the course of developing a strategic plan, organizations find themselves taking a step back
to ask the question, "How can we differentiate ourselves from the competition?" The answer to
this question often results in the development of positioning strategies, which are broad
operational strategies that organizations use to distinguish themselves and drive their success.
The choice of a particular positioning strategy can have a significant impact on the strategic
direction of the organization.

Michael Treacy defined three primary positioning strategies:

 Operational Excellence

 Product Leadership

 Customer Intimacy

His research indicated that the best organizations in the world, while at least adequate at all
three, typically distinguish themselves in one of the three areas.

McDonalds - Operational Excellence


McDonalds distinguish itself by doing business faster, more consistently, or more efficiently
than anyone else. They have fine-tuned the operation so well, that you as a customer expect
perfection every time.

McDonalds - Customer Intimacy


McDonalds strives to win by knowing its customers better than anyone else and using that
knowledge to competitive advantage. In a world replete with poor service, McDonalds stands
out by delivering consistently courteous service, which has became the competitive advantage
of McDonalds. Ritz Carlton, Nordstroms, Amazon.com are good examples of such positioning
strategy.

Finally we can say that the McDonalds has marketing dominance. They have won by
positioning their products in the hearts and minds of their customers, better than anyone else.
Finally, is it operational excellence, product leadership, customer intimacy or marketing
dominance? In case of McDonalds it’s a combination of all.
Product
When did your favorite McProduct come into existence?

1955 Hamburgers, cheeseburgers, fries, shakes, soft drinks, coffee and milk
1963 Filet-O-Fish
1968 Big Mac and Hot Apple Pie
1973 Quarter Pounder and Egg McMuffin
1974 Cookies
1977 Breakfast Menu
1978 Sundaes
1979 Happy Meals
1983 Chicken McNuggets
1986 Biscuit Sandwiches
1987 Salads
1998 McFlurry Desserts
1999 Breakfast Bagels
2000 Chicken McGrill and Crispy Chicken
2001 Big N' Tasty
2003 Premium Salads, Newman's Own® salad dressings and McGriddles
2004 2004 Chicken Selects® Premium Breast Strips

The best way to hold customers is to constantly figure out how to give the customers more for
less. Product is the key element in the market offering. Marketing mix planning begins with
formulating an offering to the target customers’ needs or wants. McDonald’s core product and
focus continues to remain burgers. Its marketing strategy is simple - satisfying the customer.

The biggest establishment in the fast-food market needs to be the leader of customer
satisfaction. To satisfy the customers in the fast food market one needs to satisfy the basic
needs of the customer. McDonald’s serves the world some of its favorite foods - World
Famous French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin.
Many of McDonald’s ideas for reviving its global fortunes involve expanding beyond the
hamburger.
One of the aims of McDonald’s is to create a standardized set of items that taste the same
whether in Singapore, Spain or South Africa. The structure of the McDonald’s menu remains
essentially uniform the world over: main course burger/sandwich, fries, and a drink along with
an overwhelmingly Coca-Cola.

McDonald’s learned that, although there are substantial cost savings through standardization,
being able to adapt to an environment ensures success. Therefore the concept of ``think global,
act local’’ has been clearly adopted by McDonald’s. Adaptation is including consumer tastes/
preferences and laws/customs. There are many situations where McDonald’s adapted the
product because of religious laws and customs in a country. With guidance from its local
partners, McDonald's is able to adapt - where necessary - its menu and restaurant operations to
complement existing eating-out options. McDonald's local owners understand what their
customers want and perhaps more importantly, what is acceptable within local customs and
values.

Adaptation

In Israel, after initial protests, Big Macs are served without cheese in several outlets, thereby
permitting the separation of meat and dairy products required of kosher restaurants.
In Malaysia and Singapore, McDonald’s underwent rigorous inspections by Muslim clerics to
ensure ritual cleanliness; the chain was rewarded with a halal (``clean’’, ``acceptable’’)
certificate, indicating the total absence of pork products.

In UK, in a break from McDonald's traditional reputation as a burger and fries joint, the new
range brings in balsamic dressing and rocket as salad ingredients and Evian water . The move
comes after McDonald's, mindful over growing public anxiety about obesity, revealed that it
was dropping its "super size" portions.
McDonald’s restaurants in India serve Vegetable McNuggets and a mutton-based Maharaja
Mac (Big Mac). Such innovations are necessary in a country where Hindus do not eat beef,
Muslims do not eat pork, and Jains (among others) do not eat meat of any type.

Adapting the product offer

There are also many examples of how McDonald’s adapted the original menu to meet
customer needs/wants in different countries.

In tropical markets, guava juice was added to the McDonald’s menu. In Germany, beer is sold
as well as McCroissants. Chilled yogurt drinks are available in Turkey, espresso and cold pasta
in Italy. Teriyaki burgers are sold in Japan, vegetarian burgers in The Netherlands.
McSpaghetti has become increasingly popular in the Philippines. McLaks (grilled salmon
sandwich) are sold in Norway, McHuevo (poached egg hamburger) in Uruguay. In Thailand,
McDonald’s introduced the Samurai Pork Burger with sweet sauce.

In the last two years in India, it has introduced some vegetarian and non-vegetarian products
with local flavors that have appealed to the Indian palate. Efforts are on to enhance variety in
the menu by developing more such products. In addition, they've re-formulated some of their
products using spices favoured by Indians. Among these are McVeggie™ burger, McAloo
Tikki™ burger, Veg. Pizza McPuff™ and Chicken McGrill™ burger. They've also created
eggless sandwich sauces for vegetarian customers. Even the soft serves and McShakes™ are
egg-less, offering a larger variety to Indian vegetarian consumers. McDonald's has also added
Chatpatey (spicy) Potato Wedges™ and the Wrap to their menu in 2002. McDonald's
commitment to its Indian customers is also shown in its development of special sauces that use
local spices.
Food Ingredients

Suppliers are dedicated to providing McDonald's with top quality material that is continually
monitored for freshness and safety. McDonald’s uses regional suppliers to ensure that the
freshness is delivered to customers in every product they buy.
Food quality is key at McDonald’s. They seek out fresh lettuce and tomatoes, quality buns and
potatoes, pure ground beef, select poultry and fish and wholesome dairy products. All of the
beef, chicken and pork that are used are purchased from federally inspected facilities to ensure
freshness, wholesomeness and peak quality when served to customers.

Non-Vegetarian Ingredients

Chicken

The chicken products are made from high quality boned breast and leg meat and are covered in
a specially seasoned, lightly battered coating. They are shaped in uniform sizes to ensure
consistency in weight and value.

Fish
The fish products in McDonald's Filet -O-Fish are 100% pure whole white fillets that are
lightly breaded.

Their exacting quality standards for fish surpass federal requirements. The ocean-fresh quality
of Filet-O-Fish is a result of the process and ability to freeze the fish at sea to maintain
freshness.

Vegetarian Ingredients

Vegetables
McDonald’s use freshly shredded lettuce, onions and tomatoes in their restaurants. All their
vegetable products are processed from high quality graded vegetables in a 100% dedicated
vegetarian plant.
Potatoes
McDonald's French fries are famous around the world. To make French fries, McDonald’s
uses only the best potatoes available from their own potato farms. Their potato suppliers make
many of the same nationally recognized brands of potato products to make customers feel that
they are with their family at home.

These potatoes are cut, blanched and processed on state-of-the-art processing lines to ensure
maximum retention of nutrients. Their French Fries and Potato Wedges are cooked at the
plant in 100% vegetable cooking oil.

Other Ingredients

Cheese & other Dairy Products

All dairy products like cheese, McShakes™ and Soft Serves are made from fresh dairy milk.
All dairy products including cheese have a role to play in a balanced diet because they contain
a wide variety of essential nutrients such as protein, calcium, fat solubles, phosphorus, etc.
McDonald's uses a special blend of pasteurized American cheese to complement the flavour of
their sandwiches.

Buns

McDonald's uses buns made from locally grown wheat flour. They are baked locally and
delivered fresh, several times each week to McDonald's restaurants.

Cooking oil

Food preparations are done in 100 % refined vegetable oils at the restaurants and plants. They
use liquid oil and not hydrogenated oil. This means there are no TFAs or Trans Fatty Acids in
the French Fries or any other products. Additionally, these vegetable oils contain some
essential fatty acids [EFA] necessary for growth.
McMenu

McDonald's customers always receive the hottest and freshest food right after they've ordered.
And this, at the speed they've come to expect of McDonald's, which has defined fast service
for the past five decades. Food quality is the crucial element at McDonald's. Despite extensive
and meticulous quality tests at the supplier end, all products are once again carefully
scrutinized at the restaurant. Immaculate standards of quality allow for nothing but the best to
reach customer’s tray.

Their products are sourced from the highest quality ingredients, prepared hygienically and
treated to regular quality checks such as the McDonald’s Quality Inspection Program (QIP).

Though all McDonald's food products offer tremendous value, they continually review and
improve their menu offerings to make sure that they not only meet their customers’
expectations, but also exceed them. As a result, the company keeps introducing a series of
ongoing value options to enable their customers to appreciate this aspect of the brand even
more strongly.

VEG MENU

McVeggie™, Paneer Salsa Wrap™, Crispy Chinese, Veg McCurry Pan™, Brocolli ‘n’
Mushroom, Pizza McPuff™

NON VEG MENU

McDonald's Chicken Selects, McDonald's Dollar Menu, McDonald's McGriddles Breakfast


Sandwiches, McDonald's Premium Salads

McDonald's celebrated year 2002-03 as the 'Year of Taste' as a part of which a plethora of new
offerings like The Wraps - Paneer Salsa for vegetarians, Chicken Mexican for non vegetarians
and McCurry Pans have been introduced. McCurry Pan was the first baked dish in McDonald's
product portfolio in India.
Mcdonald’s has always offered tea and coffee in their menu at their restaurants but recently
McDonald’s has tied up with Coca - Cola to serve their Georgia Gold brand hot beverages in
their restaurants. McDonald’s believes in providing variety and in keeping with this it tries to
add value to the customer’s eating out experience.

McDonald’s has its own soft-serves to which it has received overwhelming response.( soft
serve sales have gone up by 25%). But they keep introducing new items to their menu. Before
introducing any product on the menu, the company conducts extensive consumer research.
Cadbury enjoys a 70% share in the chocolate market. McDonald’s introduced McSwirl as it
offers a fantastic product to consumers at a great price, which is basically a value addition.

Quality, Service, Cleanliness (QSC)

McDonald’s uses the finest available products and carefully developed formulae. They also
encourage their employees to check products that they prepare or serve. McDonald’s believe
that “cleanliness is a magnet drawing customers to their restaurants” , and therefore aim to
ensure that their restaurants are spotless at all times, both inside and out. Quality and
cleanliness, however, are wasted without fast, courteous service. McDonald’s firmly believe
that a smile does as much to bring a customer back as does the best food in the world.
McDonald’s always reminds its employees that the customer is the most important single
factor in their business. They also train their employees to treat everyone, especially the
customer, in the way that they would want to be treated themselves. Mystery Diners, employed
by the company, visit each store once a month checking that overall customer service
requirements are met. McDonald’s believe that through delivering great levels of QSC,
(Quality, Service, Cleanliness), 100% customer satisfaction can be achieved, enabling them to
become the customer’s favorite quick service restaurant.
Price

“Pricing objective of McDonald’s – To serve the customers”


The marketplace today is complex network of interacting layers, dynamically reshaping
themselves to suit the purpose of business. The changes have been compounded by the new
paradigms established in customer management and loyalty and heightened levels of
competition and revenues require micro management. Yet this entire complex ecosystem still
follows the primary principles of business, “money for goods and services consumed”. It is
hardly surprising therefore that pricing has become a complex activity.

In the overall marketing mix of McDonald’s, price is probably the most important item that
can affect a company’s sales and profitability. The main purpose of this “P” to set the price
level and measure its impact on McDonald’s business model.

Pricing Decisions

Factors, which McDonald’s have taken into account while determining prices especially in the
global scenario

 Cost
The essential question is what kind of costs to be considered in order to price the product.
Some of the international marketing costs include market research cost, product modification
cost, packaging cost etc. while deciding the price level.

 Competitors
• Burger King’s and McDonald’s price war.

• Wendy’s I$ Burgre in the Australian market.

• Nirulas, wimpy and local players in Indian market (like Keventers) in the
unorganized segment.

 Exchange rate
A firm engaged in international transaction cannot ignore the exchange rates while
determining the price level in the foreign market. In India McDonald’s haven’t priced its
products as they have done in the European countries or for say USA or UK. In USA
McDonald’s came up with the one$ burger but in India the company cannot price its burger at
this rate.

Pricing Strategies – McDonald’s

There are many ways to price a product. Let's have a look at McDonald’s Pricing strategy.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main
pricing policies/strategies. They form the bases for the pricing strategy. McDonald’s pricing
strategy is a combination of some, which are: -

Penetration Pricing

The price charged for products and services is set artificially low in order to gain market share.
Once this is achieved, the price is increased. In New Zealand McDonald’s use this strategy to
eliminate one local fast food chain.
Economy Pricing
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum.
McDonald’s have always priced its product at relatively lower level in the Indian market. Even
in the USA the company has come out with the one Dollar meal to provide the more value for
their money.

Product Line Pricing


Here sellers combine several products in the same package. Where there is a bundle of product
or services is combined to provide more value to the customers. Time to time McDonald’s
come out with the combo packs or happy meal to serve the desire of the customers.

Promotional Pricing
Pricing to promote a product is a very common application. There are many examples of
promotional pricing including approaches such as Buy One Get One Free. In India
McDonald’s have the concept of Happy Hours in which you buy one product and you get one
free. For example you buy one coke and you get other for free.

Value Pricing
This approach is used where external factors such as recession or increased competition force
companies to provide 'value' products and services to retain sales.
e.g. value meals at McDonalds.

McDonalds has a target of value prices and of restraint, or reduction in real prices over time, to
the extent that is sustainable). The McDonalds set up is proposition to this low-price bias in an
environment in which the interests of McDonalds and the licensees are hotly opposed, not co-
operative or similar.

A Skeletal Model of McDonalds Pricing:

To understand the in-built incentives for McDonalds to keep the price as low as possible and to
do so against the interests of the licensee. The following model is realistic in that the central
components are related to ratios and market circumstances that capture the McDonalds system
and current service fee rules and cost conditions. Assume the following: -

1) Base case sales of 1000 hamburger meals over a period (like a day or part of a day) at
meal price $5. Thus product sales revenue of $5000.
2) Food costs of $2.50 per meal, making $2500 in the trading period.
3) Other consumable costs set at $1000 for the trading period, thus Profits After
Consumables at $1500 (or 30% of sales revenue).
4) System Fee of $250, being 5% of sales.
5) An alternative discount situation has a 10% price drop to $4.50 per meal with instant
price-elasticity of 1.5 (consistent with McDonalds strategy of not discounting unless
sales revenue expands). Volume thus rises to 1150 meals, and food costs from $2500 to
$2875. PAC is now $5175 less $2875 less $1000 = $1299 (or 25% of sales).
6) The system fee in the alternative discount situation expands to capture 9% of the entire
increase in sales revenue (2.8.5-7), thus to $266, which remains within the 7% cap.
7) The inference is that the licensee receives a sum of $1250 as PAC less system fee in
the base case, but only ($1299-$266) $1033 in the price discount scene.

The obvious and compelling inference is that the interests of McDonalds and the licensee are
diametrically opposed here. With the discount, McDonalds gets a 6% increase in service fee
income and the licensee suffers a 17% cut in income defined as PAC less service fee. This
example shows very bluntly why the interests are opposed, why McDonalds has an in-built
incentive in this structure to maintain low prices, and why franchisees are disadvantaged.

Pricing decisions
For each country, there is a rigorous pricing process that is used to determine the price for that
particular market. The process is listed below: -
(1) Selecting the price objective;
(2) Determining demand;
(3) Estimating costs;
(4) Analyzing competitors’ costs, prices and offers;
(5) Selecting a pricing method; and
(6) Selecting a final price.
McDonald’s has realized that, despite the cost savings inherent in standardization, success can
often be attributed to being able to adapt to a specific environment. This is indeed the case
with its implementation of its pricing strategy, which is one of localization rather than
globalization. Table II illustrates the comparative Big Mac prices (flagship brand of
McDonald’s) from around the world. It succeeds in highlighting the point that McDonald’s has
had to come up with different pricing strategies for different countries. More importantly,
rather than just having a different pricing policy for the Big Mac in these listed countries,
McDonald’s has had to select the right price for the right market. The highest comparative
price for the Big Mac is that of our own country, the UK, but why is that the case? How
McDonald does’s come to its pricing decision?
The process above sets out the basic framework that allows McDonald’s to set localized
pricing.

This pricing strategy does not always work successfully, though, as was the case in the USA in
1997 when McDonald’s was losing domestic market share. To combat this, they had to lower
prices in an attempt to increase revenues. Similar efforts had also to be made in Japan for the
same reason, proving once more the importance of correct price setting.
In August of 2002, McDonalds lowered the price of their hamburger in Japan to 59 yen (50
cents US). At first it brought in a lot of customers and a surge in sales. But the initial euphoria
faded as the skepticism, already implanted in people's minds during the previous phase, began
to grow. It was pretty obvious, even for naive parents and teenagers that 59 yen would not pay
for the hamburger they eat. Accordingly, people assumed that there must be a trick in the
pricing scheme, or a skewed price list, which would enable the company to make money. This
resulted in apathy among people, and an erosion of the brand image.
The official stance on McDonald’s pricing policy is highlighted in the company’s mission
statement, where it states that the most fundamental element of determining price was:
“Being in touch with the pricing of our competitors allows us to price our products correctly,
balancing quality and value.”
Therefore, it is possible to conclude that, by looking at other competitors in each country,
McDonald’s can set the appropriate price for their products. In New Delhi, India, McDonald’s
was looking at market penetration in October 1996, and set price through looking at Nirula’s, a
local food chain. They used this local example as a guideline to what the Indian would
perceive as an acceptable price and hence what they should charge.
A comparative survey of prices was carried out in Hong Kong in June 1994 and demonstrated
that McDonald’s in price is equal to or cheaper than its competitors in the fast food sector. The
remarkable thing is, however, that not only is McDonald’s competitive in the fast food sector
but its prices remain competitive with those of other food purveyors. In Hong Kong, for
example, an
Average ``value meal’’ is less than half the price of a simple noodles meal! It is also important
to look at the life cycle of a product/brand before setting price, as then it is possible to select a
pricing strategy from this

McSwoop
McDonald's is using an interesting new strategy to lure the budget-conscious Indian bite-
grabber. It is going out for the real market in India- the working class, the people who make up
the millions, the actual millions with their meals for just Rs 20.
Localization has been on for a while. Paneer Salsa Wrap and McCurry Pan are just among the
newest experiments in wowing the Indian palate. Low-end pricing---as a primary lure-in---has
been around for years too, ever since McDonald's struck the idea of a Rs 7 cone of ice cream
(the soft serve bait). But a meal for Rs 20 takes it all and the brand is actually grabbing
attention. McDonald’s is talking mass, Indian style (and lovin' it )
Pricing Strategy of McDonald’s = Perceived Value Pricing

Finally for a fast food restaurant what matters is that how the customers perceive the price.
Place
“McDonalds’s today is one of the world’s great entrepreneurial organizations, with four out
of every five restaurants worldwide run by an affiliate partner of the company or a
franchisee.”

McDonald’s realizes the potential for growth in international markets. Over the long term,
markets like China, Italy and Mexico are expected to represent a growing proportion of
restaurant additions.

Contractual Agreements

Licensing Franchising

Strategic Joint
Alliances Ventures
)

McDonald’s has always been A Franchising Company. The McDonald’s Corporation is the largest
worldwide franchised food service organization. McDonald's has always been a franchising
Company and has relied on its franchisees to play a major role in its success. McDonald's
remains committed to franchising as a predominant way of doing business. Approximately
70% of McDonald's worldwide restaurant businesses are owned and operated by independent
businessmen and women, as franchisees.
100
80
60 USA
40 UK
20
0
1
Country

In the USA, 87% of restaurants are owned and operated by franchisees. In the UK, this figure
lies at just over 20%.

The Franchisee Business Model

McDonald’s charge franchisees a levy on sales. This levy consists of a service fee of 4%,
and a rent charge of 7%. the McDonald’s model produced stunning annual average revenue
growth of 24 percent from 1965 to 1991. Clearly, an increase in the number of franchised
restaurants leads to the direct effect of an increase in McDonald’s’ revenues. McDonald’s can
also boast that it is the largest retail property owner in the world. .

McDonald’s believes that the Corporation can be successful only if the franchisee is successful
first. It believes in partnering relationship with its owner/ operators, suppliers and employees.
Success for McDonald's Corporation flows from the success of its business partners.

McFranchiser

The company’s selection of prospective candidates is based on an assessment of overall


business experience and personal qualifications. It looks for individuals with good "common
business sense", a demonstrated ability to effectively lead and develop people, and a history of
previous success in business and life endeavors. A restaurant background is not necessary. It
franchises only to individuals, not to corporations, partnerships, or passive investors.
More specifically, it looks for the following attributes in a potential candidate:

• Business experience in the market where they are seeking a franchise


• Demonstrated personal integrity with emphasis on interpersonal skills
• A willingness to participate in a comprehensive training program
• A willingness to personally devote full-time efforts to the day to day operations of a
McDonald's restaurant business
• A history of success and the ability to work well within a franchising organization

From its side, it offers support in the areas of operations, training, advertising, marketing, real
estate, construction, purchasing and equipment
McDonald's has very close relationships with its suppliers, even making sure that their
different suppliers communicate with one another regarding procedures, and the introduction
of new technology, in order for the McDonald's corporation to maximize its profits through
efficient operations.

McDonald’s India

“We serve around half a million customers on an average, in our restaurants across the
country every day.”

McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation


[USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd.
owns and operates McDonald's restaurants in Western India. While Connaught Plaza
Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations.

Setting Up Of an Extensive Food Chain

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. These standards also strictly adhere
to Indian Government regulations on food, health and hygiene. 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.
For instance, Cremica Industries worked with one of McDonald's suppliers from Europe to
develop technology and expertise, which allowed Cremica to expand its businesses from
baking to also provide breading and batters to McDonald's India and other companies. Another
benefit of expertise in the areas of agriculture allows McDonald's and its suppliers to work
with farmers in Ooty, Pune and Delhi and other regions to cultivate high quality lettuce. This
includes sharing advanced agricultural technology and expertise like utilisation of drip
irrigation systems that reduce overall water consumption and agricultural management
practices, which result in greater yields.
McDonalds has carefully identified local Indian businesses that take pride in satisfying
customers by presenting them with the highest quality products. McDonald's India today
purchases more than 96% of its products and supplies from Indian suppliers. The
relationship between McDonald's and its Indian suppliers is mutually beneficial. As
McDonald's expands in India, the supplier gets the opportunity to expand his business,
have access to the latest in food technology, get exposure to advanced agricultural
practices and the ability to grow or to export. There are many cases of local suppliers
operating out of small towns who have benefited from their association with McDonald's
India.
The Supply Chain
Supply Chain is a network of facilities including - material flow from suppliers and their
"upstream" suppliers at all levels, transformation of materials into semi-finished and finished
products, and distribution of products to customers and their "downstream" customers at all
levels. So, raw material flows as follows: supplier - manufacturer – distributor – retailer –
consumer. Information and money flows in the reverse direction. The balance between these 3
flows is what a Supply Chain is all about.

When there is a balance in the finished product ordering, the Supply Chain operates at its best.
Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories,
shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and
mistrust between supply chain partners. This is called the Bullwhip Effect. Depending on the
situation, the Supply Chain may include major product elements, various suppliers,
geographically dispersed activities, and both upstream and downstream activities. It is critical
to go beyond one’s immediate suppliers and customers to encompass the entire chain, since
hidden value often emerges once the entire chain is visualized. Understanding the value to the
downstream customer is part of the supply chain management process.

Cold Chain - Spreading The Spirit of Enterprise All Over India

A unique sense of dedication and commitment characterizes McDonald's India. Commitment


to be driven by the leadership of local owners. Commitment to provide quality products and
fast friendly service at a real value to support other Indian businesses through local sourcing
and imparting new skills and to generate local employment by being a part of the local
culture. This commitment has translated into enduring benefits to the businesses at the grass
root level, in the areas of introduction of new crops, new agricultural practices and food
processing methods and procedures.
McDonald's unique 'cold chain', on which the fast food major has spent more than six years
setting up in India, has brought about a veritable revolution, immensely benefiting the farmers
at one end and enabling customers at retail counters get the highest quality food products,
absolutely fresh and at great value.
McDonald's, through its unique cold chain, has been able to both cut down on its operational
wastage, as well as maintain the freshness and nutritional value of raw and processed food
products. This has involved procurement, warehousing, transportation and retailing of
perishable food products, all under controlled temperatures.
Setting up this extensive cold chain distribution system has involved the transfer of state-of-
the-art food processing technology by McDonald's and its international suppliers to
pioneering Indian enterprises, who are today an integral part of the McDonald’s cold chain.

Local Sourcing Is Key for Truly Indian Products


Around the world, McDonald's traditionally operates with local partners or local
management. In India too, McDonald's purchases form local suppliers-. 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
McDonald's sources food products form local companies. Fresh Lettuce comes from Pune,
Delhi, Nainital and Ooty; Cheese form Dynamix Dairies, Baramati, Maharashtra; fresh Buns
from Cremica, Phillaur, Punjab and Mrs. Bector and Sons, Khopoli, Maharashtra; Sauce from
Bector Foods, Phillaur, Punjab and Hindustan Lever Limited-Best Foods Division, Thane,
Chicken Patties, Vegetable Patties, Pies and Pizza McPuff™ from Vista Processed Foods,
Taloja, Maharashtra. Dairy Products from Amrit Food, Ghaziabad, UP.

Potato Farming In Gujarat


McDonald's India, even prior to its entry into India, was committed to working with local
suppliers and farmers to source all its requirements. The company therefore spent 6 years and
around Rs. 450 crore to set up the food supply chain even before opening its first restaurant in
the country.

India, despite being the world’s second largest producer of food, loses nearly Rs.50,000 crore
worth of food produce due to wastage at various levels, especially due to lack of proper
infrastructure for storage and transportation. McDonald's India has pioneered the cold chain
management system wherein the freshness, crispness and nutritional value of vegetables
and processed products are retained.

In 1991, McDonald's was looking for a particular variety of potato for manufacturing its world
famous French fries. One of McDonald’s suppliers – Lamb Weston – invested heavily in
setting up production lines to process these potatoes and make the fries. However, production
was discontinued, as the right quality of potatoes could not be sourced. The right quality
potato in India was unavailable as farmers used seeds from the preceding crop, which in turn
resulted in a single variety and poor quality potatoes. McDonald’s needed the process-grade
variety of potato for its products, which are as per McDonald's international quality standards.
The variety of potato required by McDonald’s had to have a certain length, high solids content
and low moisture content while the ones that were available were of the table-grade variety.
Nonetheless, as per its initial commitment to local sourcing, McDonald's and its supplier
partner, McCain Foods Pvt. Ltd., began to work closely with farmers in Gujarat and
Maharashtra to develop process-grade potato varieties.
McCain Foods Pvt. Ltd. is the world’s largest French Fry Company in the world. Established
in 1957, today it is a brand that is known and respected in more than 100 countries, generating
worldwide sales of more than $5.5 billion. It has more than 55 processing plants on 4
continents (29 of which are French fry and potato specialty facilities) and exports to more than
80 countries worldwide.

Leaders in agronomy, technology and innovation, McCain Foods Pvt. Ltd. partnered with
McDonald’s to work with farmers in Gujarat (specifically the towns of Deesa and Kheda) to
interact with agronomists and field assistants to demonstrate the best practices – right from
better agronomy techniques like irrigation system, sowing seed treatments, planting methods,
fertilizer application programmes and better storage methods for the produce. In addition to
this, the farmers also benefit through incremental monetary gains as they sell directly to
McCain Foods Pvt. Ltd. instead of commission agents. The result of these efforts has been that
now the Gujarat potato crop has been utilised to make McDonald’s ‘Chatpatey’ Potato
Wedges.

Suppliers
Trikaya Agriculture - Supplier of Iceberg Lettuce
Implementation of advanced agricultural practices has enabled Trikaya to successfully grow
speciality crops like iceberg lettuce, special herbs and many oriental vegetables.

Vista Processed Foods Pvt. Ltd. - Supplier of Chicken and Vegetable range of products
A joint venture with OSI Industries Inc., USA, and McDonald's India Pvt. Ltd. Vista Processed
Foods Pvt. Ltd. produces a range of frozen chicken and vegetable foods. A world class
infrastructure at its plant at Taloja, Maharashtra,

Dynamix Diary - Supplier of Cheese


Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a
network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled
farmers augment their income by finding a new market for surplus milk.
Amrit Food - Supplier of long life UHT Milk and Milk Products for Frozen Desserts
Amrit Food, an ISO 9000 company, manufactures widely popular brands - Gagan Milk and
Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.

Radhakrishna Foodland - Distribution Centre


An integral part of the Radhakrishna Group, Foodland specialises in handling large volumes,
providing the entire range of services including procurement, quality inspection, storage,
inventory management, deliveries, data collection, recording and reporting.

From Field To 2º C In 90 Minutes

Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such
enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural
management practices and sharing of advanced agricultural technology by McDonald's has
made Trikaya Agriculture extremely conscious of delivering its products with utmost care and
quality. Initially lettuce could only be grown during the winter months but with McDonald's
expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to
grow this crop all the year round.

McDonald's has provided assistance in the selection of high quality seeds, exposed the
farms to advanced drip-irrigation technology, and helped develop a refrigerated
transportation system allowing a small agri-business in Maharashtra to provide fresh,
high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers
away. Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room
to remove field heat, a large cold room and a refrigerated van for transportation where the
temperature and the relative humidity of the crop is maintained between 1º C and 4º C and
95% respectively. Vegetables are moved into the pre-cooling room within half an hour of
harvesting. The pre-cooling room ensures rapid vacuum cooling to 2º C within 90 minutes.
The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay
between harvesting, pre-cooling, packaging and cold storage.
With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this
high value product to other international markets, especially to McDonald's Middle East and
Asia Pacific operations. McDonald's expertise in packaging, handling and long-distance
transportation has helped Trikaya to do trial shipments to the Gulf successfully.
In addition to export, McDonald's assistance has enabled Trikaya Agriculture to supply this
crop to a number of star-rated hotels, clubs, flight kitchens and offshore catering companies all
over India.

Flavour and Freshness Locked In At - 35° C

Vista Processed Foods Pvt. Ltd., McDonald's suppliers for the chicken and vegetable range
of products, is another important player in this cold chain. Technical and financial support
extended by OSI Industries Inc., USA and McDonald’s India Private Limited have enabled
Vista to set up world-class infrastructure and support services.
This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as
low as - 35° C. This is vital to ensure that the frozen food retains it freshness for a long time
and the 'cold chain' is maintained. The frozen product is immediately moved to cold storage
rooms.

With continued assistance from its international partners, Vista has installed hi-tech equipment
for both the chicken and vegetable processing lines, which reflect the latest food processing
technology (de-boning, blending, forming, coating, frying and freezing). For the vegetable
range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural
sensitivities in mind, both processing lines are absolutely segregated and utmost care is
taken to ensure that the vegetable products do not mix with the non-vegetarian products. Now,
at Vista, a very wide range of frozen and nutritious chicken and vegetable products is
available. Ongoing R&D, both locally and in the parent companies, work towards innovation
in taste, nutritional value and convenience. These products, besides being supplied to
McDonald's, are also offered to institutions like star-rated hotels, hospitals, project sites,
caterers, corporate canteens, schools and colleges, restaurants, food service establishments and
coffee shops.
Today, production of better quality frozen foods that are both nutritious and fresh has made
Vista Processed Foods Pvt. Ltd. a name to reckon within the industry.

From Farm to Bulk Cooler in Less Than 90 Minutes

McDonald's suppliers of cheese, Dynamix Dairy, too, recognizing the need for quality milk to
make quality cheese, has set up a dedicated quality program for milk procurement. They
have made significant investments in setting up bulk coolers at all milk collection centres in
the Baramati area, where they are based. Efforts have been made to see that the bulk cooling
centres are located in a way that farmers do not have to travel more than an hour from their
farms to reach the collection centre. This has drastically reduced the time from milking to
refrigeration, which is critical, especially since the lack of proper refrigeration can greatly
impact the quality of milk. On receipt, the milk is immediately stored in the bulk coolers at the
collection centres, to prevent growth of bacteria in the milk and preserve its freshness - thus,
maintaining the 'cold chain'.

And In the End Bringing It To The Consumer

McDonald's local supply networks through Radhakrishna Foodland, which operates


distribution centres (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs
have focused all their resources to meet McDonald's expectation of 'Cold, Clean, and On-
Time Delivery' and plays a very vital role in maintaining the integrity of the products
throughout the entire 'cold chain'.

Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items
from different parts of the country. These items are stored in rooms with different
temperature zones and are finally dispatched to the McDonald's restaurants on the basis
of their requirements. The company has both cold and dry storage facilities with capability
to store products up to -22º C as well as delivery trucks to transport products at temperatures
ranging from room temperature to frozen state.
All these suppliers share McDonald's commitment and dedication to satisfying customers by
supplying them the highest quality products. They are working cohesively to ensure that the
final product reaches the customer consistently each time and every time. At their level, every
care is taken to guard against any interruptions in the cold chain which can break the link and
have a detrimental effect on the quality of the product. And more products reaching the
market fresher and quicker not only benefit the economy but also help the farmer earn more.
Promotion
Promotion consists of five major tools:
(1) Advertising;
(2) Direct marketing;
(3) Sales promotion;
(4) Public relations and publicity; and
(5) Personal selling.

Using these tools, McDonald’s looks to localise its marketing communications strategy as it
needs to consider the enormous range of cultural and other differences that it would be faced
with in each country. It would be naive to ignore the various local markets and the factors
which may affect the performance of its product in them. It also needs to analyse consumers’
attitudes towards its product, usage patterns and ethnic, moral and religious considerations in
that environment. Although the idea is to promote McDonald’s as a global image, McDonald’s
focuses on the needs of the communities they are entering. In a communications context, the
maxim ``brand globally, advertise locally’’ is the McDonald’s promotional strategy.

Advertising

“Ronald loves McDonald’s and McDonald’s food. And so do children, because they love
Ronald.”

Children are often the key decision-makers concerning where a family goes to eat. Children
exert a phenomenal influence when it comes to restaurant selection. McDonald’s constantly
advises its marketing and advertising department to do everything they can to appeal to
children’s love for Ronald and McDonald’s
McDonald’s has a wide range of advertising campaigns in various countries. For example, in
the UK, they use the England footballer Alan Shearer as a figurehead to promote their
hamburgers, whereas in France they use Fabien Barthez, the French international goalkeeper.
The point is that the image they are trying to convey is the same; McDonald’s just uses
different personalities in different cultures to get their message across.
In East Asia, McDonald’s could not have had the success they have experienced without their
appeal to younger generations of consumer: children and teenagers. The corporation makes a
point of cultivating this market and invests heavily in television advertising aimed specifically
at children.

A further example of McDonald’s acting more locally was when in Beijing, China, the
company’s male mascot, Ronald, was paired with a female companion known as Aunt
McDonald, whose job it was to entertain children. Once more, this shows how McDonald’s
paid particular attention to the specific market, knowing full well that this new female
companion would only be successful in certain international fast food markets and not work on
a global scale.
In contrast, in Hong Kong, McDonald’s has made great efforts to present itself as a champion
of environmental awareness and public welfare, as they see this as an important attribute to the
local consumer. A leaflet comparing the Hong Kong fast food industry saw McDonald’s
adverts as: Promoting McDonald’s as a local institution, with a clear stake in the overall health
of the community.
In 1994, McDonald’s changed their advertising slogan to ``There’s nothing quite
like aMcDonald’s’’. This saw McDonald’s attempting an image change, as they adopted a
more personal approach to their customers, trying to talk ``to’’ them rather than ``at’’
them. This was again a bid by McDonald’s to add to the whole ``McDonald’s experience’’ and
to add to their image as a global brand.

Public Relations
A feature of the localization of McDonald’s in Beijing is that, in contrast to the US practice of
substituting technology for human workers, the Beijing McDonald’s relies heavily on personal
interactions with customers. In everyday operations, one or two public relations staff in each
outlet are available to answer customers’ questions. Each restaurant assigns five to ten female
receptionists to take care of children and talk with parents. The whole courtesy issue is such a
big thing in the Far East and so McDonald’s has to pay particular attention to this.
There is no need for customer public relations officers in the UK as the British have a
completely different mentality and would be more than happy to just eat their meal and leave
the restaurant.
There are certain times, though, when McDonald’s does adopt a global strategy. In January
1997, McDonald’s announced a global alliance with Walt Disney which allowed them to share
exclusive marketing rights for everything from films to food, for the next ten years. This has
led to McDonald’s producing toys in their ``happy meals’’ for films such as A Bug’s Life, Toy
Story and the latest Disney offering, Tarzan. In this instance, there was no need for
McDonald’s to act local, asWalt Disney has a world-wide appeal that does not need altering
for different communities.

Similarly, another global public relations exercise is the Millennium Dreamers Global
Children’s recognition programme which is being presented in conjunction with McDonald’s,
Walt Disney and UNESCO. Young people from all over the world have the opportunity to
express their hopes, dreams and plans for the future.

Sports sponsorship
McDonald’s sponsors a vast array of sports, on both a national and a global scale. Globally,
McDonald’s enhances its brand name with such associations as the Olympic Games and the
World Cup, the two biggest sporting events in the global calendar. The global nature of the
events allows advertisers to produce an international campaign and, with an estimated 2 billion
people watching the World Cup, the McDonald’s message is easily conveyed. The Olympic
Games has also been a valuable advertising tool.
Nationally, McDonald’s targets specific events with which it would like to be associated. In
the USA, McDonald’s has strong links with the NBA (National Basketball Association) and
NASCAR racing, two hugely popular sports in the USA. McDonald’s recognises that these
sports are only popular in the USA and so chooses just to sponsor these sports within the US
boundaries and not on a global scale.

Community relations
McDonald’s concentrates on helping ``seek solutions for the problems facing children and
families today’’. There are 160 local RMHCs in 27 countries all aimed at the specific needs of
improving the lifestyles of under-privileged children. They attack this global problem by
addressing the problems locally.
People
Loyalty and dedication are the foundation of every successful business. McDonald’s believes
that people are their most important asset and values its skilled and motivated employee base.

Crew meetings are held about once a month to discuss policy, procedures, products, and
problems in the restaurant. Smaller sessions are also held a few times each year for the purpose
of discussing ideas, suggestions and problems. These sessions give employees the opportunity
to make their views known to the company. McDonald’s supports its employees through
university as well. It also runs its own Junior Business Management Programme for 18-21 year
olds. It also offers its employees the opportunity to become part of the corporation through
buying McDirect shares.

Training
It is the aim of McDonald’s to create a learning environment, which facilitates the
development of the highest level of skill among all employees. Their training programmes
have been designed to enable all employees to achieve the company’s goals of 100% customer
satisfaction, increased market share
and increased profitability. An ongoing programme of training evaluation enables McDonald’s
to keep training procedures up to date, and relevant to the needs of the business. McDonald’s
believe that training is the foundation of their success, and that it is an ongoing process that
belongs to all of their employees.

Employee Relations
It is McDonald’s policy to actively promote from within. Promotion is offered to employees
who show initiative and a desire to advance. Many of McDonald’s’ finest managers and senior
company personnel have been promoted from crew. This way, skills are kept in the firm, with
training costs minimised.
Process
McDonald’s trademark competition edge is its process management approach in which the
company literally put hamburgers on the assembly line. For McDonald’s outlets to succeed
they had to attain perfection by breaking the labor into parts and fine tune every aspect of
hamburger manufacture. This approach is being imitated by companies all over the world not
just fast food companies. McDonald’s even has a Hamburger University which is actively
engaged in developing efficient food assembly processes and teaching and training
McDonald’s employees, no other fast food chain goes to such lengths to ensure product
consistency

A key feature of the McDonald's model is the manner in which all of their operations are
standardised. Production line techniques are implemented in restaurants to achieve the fast
preparation of uniform quality products. With a limited menu and patented formulas, the
corporation ensures that products remain homogenous over distance and time. The fixtures and
fittings of restaurants are largely identical throughout the world, with minor variations to
account for cultural differences.
The McDonalds model exerts an enormous amount of control over its franchisees and
customers, forming the fundamental basis of the business. Employees respond to customers’
requests with scripted questions, ensuring the fast delivery of service, and same experience
time and time again.
Standardization within the McDonalds model is apparent in both the restaurants and their
suppliers. Contractors are required to share knowledge of food processing techniques, allowing
the corporation to retain consistency and control of all aspects of the business.
Quality Assurance teams are responsible for monitoring the quality of McDonald’s food
products, both in the restaurants and at suppliers at all stages of production. This involves a
continuous round of visits, inspections and audits, announced and unannounced, to all
production facilities, distribution centres and restaurants. Visits even extend to secondary
suppliers such as farms, to monitor crops growing in the field or to inspect seeds prior to
planting. Every supplier manufactures to very tight specifications, which detail the exact
quantity and quality of raw ingredients and the dimensions of the finished product. The
specifications also stipulate extensive checking procedures. In addition to studying all
production run records which are sent to McDonald’s by suppliers, McDonald’s regularly take
samples of stock at distribution centres to ensure that they conform to specifications.
The quality controls continue when the food arrives at restaurants. No delivery is accepted
until a series of quality and safety checks is completed. All restaurant staff receive
comprehensive training in food safety and hygiene and food preparation procedures. This is a
global practice and is one of the distinguishing features of McDonald’s as a fast-food
restaurant.
About 4 times each year, each restaurant (excluding franchises) is checked rigorously by Area
Managers, who make sure the crew and managers are carrying out operations correctly, as well
as other general checks. Once a year, a restaurant experiences what is known as a ‘full field’,
where area managers, other restaurant managers, and trainee managers perform a
comprehensive check on the whole operation. The results of these inspections are put into
tables, and there is always fierce competition between stores with regard to scores received.
Company representatives monitor performance by making surprise visits to McDonald’s
outlets every quarter.
The point of purchase at McDonald’s is again standardized globally. Many companies
operating globally discover language translation problems and therefore cannot use systems
globally. McDonald’s overcame this problem by using pictographs; employees world-wide
ring up sales on machines that display symbols of Big Macs, French fries, or colas instead of
words or numerals. Software links price and total items.
Research
Methodology
Research Methodology

Preliminary Information Gathering


Identification of objectives

Secondary Data Collection


Pilot Survey
Company Contact

Consumer Survey
Analysis
Summary
Research methodology

Target Respondents - Foreigners

In order to make this project effective and to show the real picture of the market:

 I have studied various players in the Fast food segment.


 In order to understand the factors influencing the perception and buying behavior of
consumers towards fast food restaurants in India and their home country we distributed
them questionnaires.
 For data collection i have used non-probability sampling.
 In order to reach the analysis stage i have carefully evaluated the questionnaires.
 For the purpose of tabulation of data i have followed mechanical tabulation

Research Design

A research design is simply a frame work or plan for a study used as a guide in collecting and
analyzing data.
The research design ensures that the study:

1. will be relevant to the problem


2. will use economical procedure
We have used the Descriptive Method as our research design. Descriptive research as their
name implies, are designed to describe something – for example, the characteristics of users of
a given product; the degree to which product or service use varies with income, age, sex, or
other characteristics; or the number who saw a specific television commercial. A majority of
marketing research studies are of this type.
Descriptive studies differ from exploratory studies in the formality with which they are
designed. These studies aim to obtain a complete and accurate description of a situation.
Formal design is required to ensure that the description covers all the phases desired.
In our project we have studied how the perception of customers varies about a restaurant like
McDonalds in two different markets.

Sampling

With non probability samples there is no way of estimating the probability that any population
element will be included in the sample. We have chosen our sample units on the basis of
accessibility. Thus there is no way of ensuring that our sample is representative of the
population as small sample size is of 50 and comprises of respondents of few age groups.

Age Groups

Age Groups Sample Size

Below 12 01
13-19 10
20-35 30
Above 35 19
Total 50

Research Analysis
McDonald’s India Vs McDonald’s Abroad

McD onalds India


V .P oor
Respondents (%)

100%
80% P oor
60% F air
40%
20% Good
0%
E xcellent
Décor

Service
Location

Courtesy

Value for
Ambience

money

Attrib u tes
Respondents (% ) McD onalds (H om e C ountry)

120 V .P oor
100
80 P oor
60
40 F air
20
0 Good
E xcellent

Décor

Service
Location

Courtesy

Value for
Ambience

money
Attrib u tes

Taste of Food (McDonalds India)

Taste of food

40% Tasty
60% Not Tasty

Taste of Food (McDonalds Home Country)


Taste of food

38%
Tasty
Not Tasty
62%

Variety in menu (McDonalds India)

Variety in menu

20%

W ide
Narrow

80%
Variety in menu (McDonalds Home Country)

Variety in menu

38%
W ide
Narrow
62%

Cleanliness (McDonalds India)

Cleanliness

33%
Clean
Dirty
67%
Cleanliness (McDonalds Home Country)

Cleanliness

25%

Clean
Dirty

75%

Price level (McDonalds India)

Price

25%

Inexpensive
Expensive

75%
Price level (McDonalds Home Country)

Price

44% Inexpensive
56% Expensive

Attributes considered important for a fast food restaurant


Importance of the Characteristics

Respondents (in % )
100 V.Unimp
80 Unimp.
60
40 Can't Say
20 Imp
0
V.imp

Variety in
Tate of

Price
Cleanliness
Food

menu
Attributes

Finding:

A ttrib u te s C o n s ide re d

100
Consideration (%)

80
60
40
20
0
Taste of F ood C leanliness P rice V ariety in m enu
Attrib u te s

90% of the respondents have favored to taste of food as major characteristic while making a
choice of their fast food restaurant. The other attributes are cleanliness, price and variety in
menu.

The Best Fast Food Option


The Best - Quick Bite Experience

Respondents (% )
50
40
30
20
10
0

Subway

(Wimpy,Quu
McDonalds

Burger king

ch,etc)
Others
Restautants

Even as per our research McDonalds is clearly the market leader as far as the best fast food
restaurant is considered. 41% of our respondents have rated it as the fest fast food restaurant in
the current scenario. Burger King and Subway are the followers with the 29% and 20%
respondents respectively.
RECOMMENDATIONS
Recommendations
1) McDonalds can introduce some Indian offerings in their outlets abroad like in US,
UK etc.where there is a substantial Indian presence. Moreover in our interactions with
foreigners we found that their perception about Indian menu was that it is tastier and
most rated ‘taste’ as a major success attribute for a fast food restaurant. The company
can test the new offerings in select outlets and based on their failure/success, withdraw
or launch them in other outlets as well

2) In their burger segment McDonalds has not delighted its customers for a very long
time. Maybe the fast food giant needs to go one step further and bring more
indianisation to its menu by offerings like omelette burgers.

3) Though most promotional schemes launched by McDonalds have so far been


successful (Happy Meals etc.), it could increase its visibility by sponsoring events
like college fests, conventions, seminars (official sponsor or put up stalls like
Dominos/Nescafe etc.)

4) Although McDonalds have started mentioning the nutrition value of its food on to the
product but still the company needs to rectify its negative image in the mind of
customers in USA, UK and in other European nations.
Conclusion

The Influence of McDonalds


Culture
One of McDonald’s major achievements was breaking through the food culture barrier.
Most countries are eager to preserve their own specific culinary culture, however through
successful global advertising, McDonald’s operates 30,000 outlets in 120 countries. Egypt,
Kuwait, Russia, and China have all been developed with the world’s largest restaurant situated
in Beijing, which has over 700 seats and 1200 staff. McDonalds has worked extensively on
establishing franchises on a multinational scale. In both Moscow and Yugoslavia, the
corporation had to set up the infrastructure in conjunction with governments to provide the
consistent standard of restaurants found around the world.

McDonalds is fully committed to becoming the global leader paying for the processing plants
needed to supply these outlets. McDonalds has worked closely with franchisees around the
world to allow them to customize outlets to cater for specific cultural needs. Variations in
menu are a key characteristic of cultural variety. In Europe beer is served, and in America
yoghurt, salads and pizza are on the menu. Stores are also varied with restaurants ranging from
small express outlets in Tokyo, where high retail costs put pressure on space, to the larger
restaurants such as the 700 seat outlet in Moscow, which attracted queues of over a thousand
people on its first day of operation.

McDonald's Influence on Society

Different businesses and services have adopted a McDonald’s style nickname. For example, in
the USA, drive in dentists, which deal with minor problems, are known as McDentists. This
shows that McDonald’s has a reputation for speed, though it also gives evidence that
McDonald’s is thought of as a basic, simple service, which admittedly isn’t too far from the
truth. This is an example of the McDonaldisation of society.

The success of McDonald’s can be attributed to efficiency, calculability, predictability, and


control. McDonald’s uses optimum methods of production, and also has an effective body of
rules and regulations, which ensure highly efficient work. This reduces wastage and ensures
optimum utilization of resources.

Customers are made to feel that they are getting a bargain, are therefore can justify spending
their money on a particular item. Predictability is a fundamental aspect of McDonald’s’
success. It gives the public assurance that products and services will be the same over time and
in all vicinities. McDonald’s have discovered that people have come to prefer a world of no
surprises, and therefore try to make the McDonald’s experience as similar as possible, in terms
of service and food. There are numerous advantages of adopting the McDonald’s model.
Nowadays, there is a wider availability of goods and services, which have a greater sphere of
influence. It is far more convenient for the public to obtain products and services, due to the
increased number of outlets, and uniform quality of goods and services. The McDonald’s
model has also brought about the availability to more economic alternatives to high priced
customised goods. The introduction of quantification now enables comparison to be made
between goods and services, in terms of size. This society has adopted a ‘bigger is better’
attitude. Finally, this new model has helped the establishment of equal treatment, regardless of
race, class, or gender.

We feel that this project has explained how the McDonald's Model has become a
characteristic of the contemporary global economy, and has helped create thousands of jobs
and improve many economies.

Globalization v/s Internationalization?

After analyzing the marketing mix of McDonald’s, it is clear that the company can be said to
be ``glocal’’, i.e. combining elements of globalisation and internationalization. McDonald’s
have achieved this through applying the maxim, ``Think Global, Act Local’’, to all the
elements of the marketing mix.
The gradual growth of McDonalds into a multi national corporation present in 120 countries
can be traced using the EPRG approach- How it has incorporated each of these in its different
processes and operations.

Be it an adaptation to local environment or tastes or preferences, McDonalds has done it in


the best possible way. It has launched a standardized menu with a slight variation in the
product offering in different countries only to make it look localized. Its restaurants the world
over look similar in ambience ( as also demonstrated in our survey), its French fries taste
exactly the same in Frankfurt as in Bangkok and everything looks the same except a slight
variation in the price menu and the customized localized offering like an Aloo Tikki burger in
India and a beef Big Mac in the USA.

McDonald’s have been so successful in performing Glocalisation that they see the way
forward as continuing to expand into these international markets adopting this approach. This
can best be explained in utilizing the Boston Consultancy Group matrix. McDonald’s reached
this conclusion by the fact that in the USA, their own domestic market, they are a cash cow
and have a lower market growth than in the global market. Globally, they are positioned as a
star brand and have the ability to obtain a higher market growth and hence profitability.
EXECUTIVE
SUMMARY
At first, most people must have laughed at the idea of a chain of restaurants
selling identical products all over the country, but little did they know that the
genius idea that they had mocked at would go on to revolutionize the business
environment of the future.

McDonald’s is now the international market leader for fast food, and has been
ever since its pioneering first restaurant was launched in San Bernardino,
30,000 California in 1948. McDonald’s is one of the world's most well-known food
Restaurants
service retailers with more than 30,000 restaurants in 121 countries serving 47
121 Countries
million customers each day1. It has a leading share in the globally branded
quick service restaurant segment in virtually every country in which it does
business. Changing consumer trends, a powerful driving force within the Quick
Service Restaurant industry, has flamed the growth of this segment.

Our group has taken up the case of McDonald’s in order to study the different
ways in which a company strategize and distinguishes its strategies in different
countries and also try and understand the complexities involved in the
differentiation and positioning strategies of the same company in different,
diverse markets spread across the globe.

We start with the global fast food industry trends and find out the current
standing of McDonalds amidst several other competitors. For this we have
adopted the Five Forces Model of Michael Porter. Then we have used the
SLEPT Approach to analyze the various Social, Political, Economic, Legal and
Technological factors affecting McDonalds and also how they decide as to
which market to enter. With this detailed analysis of the macro environment, we
try to find out how exactly has McDonalds decided upon the markets to enter
and also the mode of entry. Once it has entered a particular market, we try to
understand its segmentation, positioning and target market strategies vis-à-vis
its competitors in that

1
Source : http://www.mcdonalds.com/corp/about.html
The SLEPT
Approach particular market. With this we move on to the micro environment and perform
an in depth analysis of their marketing mix using the 7-P framework. This
project highlights how the company combines internationalization and
globalization elements according to various fast food markets. Using the effect
of strategic and tactical models, the case illustrates the effect of McDonald’s on
the global environment and how they adapt to local communities.

This project also includes primary work done to understand the perceptions of
foreign tourists about McDonalds in India as well as in their respective
Consumer countries. This differentiation helped us in understanding the rationale behind
Survey to
Study the distinct marketing strategies followed by the company in diverse markets.
Perceptions For this purpose, we had conducted a survey of around 50 foreign tourists in
Delhi at the Connaught Place outlet of McDonalds.

Towards the end, we have tried to summarize the various findings of our survey
along with those of the entire research report in order to arrive at a
comprehensive and holistic understanding of the global marketing strategies
followed by McDonalds and thereby provide few recommendations.
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Books Considered for Research

 Marketing Research by Kinnear and Taylor


 Modern Marketing Research by M.N. Mishra
 Marketing Research by Beri

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www.media.mcdonalds.com/secured/news/pressreleases/2003/Press_Release01
232003.html (21 August 2008).
• D.Cohen, "McDonald’s Posts Twelfth Straight Monthly Sales Drop," Reuters
Health, 12 March 2008; and McDonald’s Corporation, "McDonald’s Reports
March and First Quarter 2003 Sales," Press Release, 10 April 2008,
www.mcdonalds.com/corporate/press/financial/2003/04102003/index.html (21
August 2008).
ANNEXURE

Dear Respondent

1) How do u assess the following attributes of Mc Donald’s.

(IN HOME COUNTRY)

ATTRIBUTES V.poor Poor Fair Good Excellent


Ambience
Location
D’ecor
Service
Courtesy
Value for
money

(IN INDIA)

ATTRIBUTES V.poor Poor Fair Good Excellent


Ambience
Location
D’ecor
Service
Courtesy
Value for
money

2) How do you find the taste of the food?

(In home country) (In India)

 Tasty Tasty
 Not tasty Not tasty

3) What do you think about the variety in menu.

(In home country) (In India)

 Wide Wide
 Narrow Narrow

4) How do you find the cleanliness feature of the place.

(In home country) (In India)

 Clean Clean
 Dirty Dirty

5 ) How do you find the pricing the product.

(In home country) (In India)

 Expensive Expensive
 Inexpensive Inexpensive

6) What according to you are important attributes for a fast food restaurant?

Attribute V imp Imp V Unimp Unimp Cant


say
Taste of food
Cleanliness
Price
Variety in
menu

7) Which is the most important attribute of a fast food restaurant.

 Taste of food
 Cleanliness
 Price
 Variety in menu

8) Which is your favorite eating joint

 Mc Donald’s
 Subway
 Burger King
 Any other (Wimpy, Quuch)
Personal Details
Name: Address:
Ph. No.