1.

INTRODUCTION & HISTORY

1.1 Introduction: When the Dick and Mac McDonald opened their first restaurant i
n San Bernardino, California in 1948, they never could have imagined the extraor
dinary growth their company would experience. From modest beginnings, they found
a winning formula selling high quality products quickly and low-cost. It was no
t until 1955 when Ray Kroc, a salesman from Chicago, became involved in the busi
ness that McDonald's really began to flourish. Kroc realized the same successful
McDonald's formula could be exploited throughout the United States and beyond w
ith the use of franchising. A franchise is an agreement or license to sell a com
pany's products exclusively in a particular area, or to operate a business that
carries that company's name. In 1955, Kroc knew that the key to success was thro
ugh rapid expansion; thus, the best way to achieve this was through offering fra
nchises. Today, over 70 percent of McDonald's Restaurants are franchises. In 198
6, the first franchised McDonald's opened in the United Kingdom. Now, there are
over 1,150 restaurants, employing more than 49,000 people, of which 34 percent a
re operated by franchisees. Moreover, there are over 30,000 these restaurants in
more than 119 countries, serving over 47 million customers around the world. In
2000 alone, McDonald's served over 16 billion customers. For perspective, that
number is equivalent to providing a lunch and dinner for every man, woman, and c
hild in the world! McDonald's global sales were over $40 billion, making it by f
ar the largest food service company in the world. Now McDonalds Corporation USA
is the ninth most valuable brand in the world. In October 1996, McDonalds open
ed its first Indian outlet in Vasant Vihar, an affluent residential colony in In
dias capital, New Delhi. As of November 2004, McDonalds has opened a total of
58 restaurants, mostly in the northern and western part of India. While McDonald
s opened 34 restaurants in five years (by 2001), 58 restaurants in eight years
(by 2004), it is now planning to add more than 90 new restaurants in the next co
ming years. Although the initial scenes of crowds lining up for days outside the
McDonalds restaurants in Delhi and Mumbai are no longer seen, Indian consumer
response to McDonalds products still remains very strong. McDonald s India is a
joint-venture company managed by Indians. McDonalds India, a subsidiary of McD
onalds USA, has expanded its presence in India via 2 joint venture companies
Connaught Plaza restaurants and Hardcastle restaurants. McDonalds (India) has a
50 per cent equity stake each in both joint venture companies. Connaught Plaza
restaurants manages operations and expansions across North India (Delhi, Jaipur
and Punjab) led by Vikram Bakshi and Hardcastle restaurants, which is headed
by Amit Jatia, manages operations and expansions across Western India (Mumbai,
Pune, and Gujarat).
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The growth of McDonalds in India is not as rapid as in other countries. How did
McDonalds do it? How did a hamburger chain become so prominent in a cultural z
one dominated by non-beef, non-pork, vegetarian, and regional foods such as chol
a bhatura, kababs, bhaji, idli, samosa, dosa, vada, sambar, bhelpuri, and rice?
The answer to this question lies in McDonalds carefully planned entry and expan
sion strategy in accordance with Indias changing political, economic, and cultu
ral landscape in the 1990s. Six years prior to the opening of the first McDonald
s restaurant in India, McDonald s and its international supplier partners worke
d together with local Indian Companies to develop products that meet McDonald s
rigorous quality standards. Part of this development involves the transfer of st
ate-of-the-art food processing technology, which has enabled Indian businesses t
o grow by improving their ability to compete in todays international markets. M
cDonald s constructs its restaurants using local architects, contractors, labour
and - where possible local materials. McDonald s hires local personnel for al
l positions within the restaurants and contributes a portion of its success to c
ommunities in the form of municipal taxes and reinvestment. The above aspects of
McDonalds do not get covered and highlighted by the news hungry press. But whe
n the false news of using beef allow in the French fries hit the market, the pre
ss did not leave a chance to exaggerate it. Despite the fact that right form the
beginning; no beef ingredients have been used in any of the products in India.
The marketing agency of McDonalds, Mudra comes to its rescue in such times. The
advertisements created by Mudra are a rage all over the nation, especially amon
gst the children. Who can forget the little kid who gets nervous in the school c
ompetition, but becomes happy again when his father takes him to McDonalds? McD
onalds India has tried not to leave any stone un-turned in its objective to sat
isfy the Indian customer. But in Amit Jatias words, Customers are generally no
t forgiving. According to the survey conducted, customers demand low prices, mo
re seating space, more variety, home delivery, and the list is endless. The fund
amental secret to McDonalds success is the way it achieves uniformity and alleg
iance to an operating regimen with proper marketing strategy. McDonalds India h
as to adhere to many rules and regulations laid down by the parent company, and
it still has to cater to the Indian customer and his needs. McDonalds India is
a case study on how to mix conformity with creativity.
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2. PHILOSOPHY & VISION
Every company has a Vision or Mission Statement. A vision statement should be sh
ort, clear, vivid, inspiring and concise without using jargon, complicated words
or concepts. It represents the corporation guiding principles. It subtly indica
tes the businesses the firm will pursue and the customer needs it will seek to s
atisfy. The vision statement also allows the employees to clearly adhere to the
standards set up by the business unit and work in as per the guidelines framed b
y the company. 2.1 McDonalds Vision Statement "McDonald s vision is to be the
world s best quick service restaurant experience. Being the best means providin
g outstanding quality, service, cleanliness, and value, so that we make every cu
stomer in every restaurant smile." The McDonald s philosophy of Quality, Service
, Cleanliness and Value (QSC&V) is the guiding force behind its service to the c
ustomers. McDonalds India serves only the highest quality products. All McDonal
ds suppliers adhere to Indian Government regulations on food, health and hygien
e while continuously maintaining their own recognized standards. All McDonalds
products are prepared using the most current state-of-the-art cooking equipment
to ensure quality and safety. At McDonalds, the customer always comes first. Mc
Donalds India provides fast friendly service- the hallmark of McDonalds that s
ets its restaurants apart from others. McDonalds restaurants provide a clean, c
omfortable environment especially suited for families. This is achieved through
McDonalds stringent cleaning standards, carefully adhered to. McDonalds menu i
s priced at a value that the largest segment of the Indian consumers can afford.
McDonalds does not sacrifice quality for value rather McDonalds leverages e
conomies to minimize costs while maximizing value to customers. The main effort
of McDonaldss service is to make customer the whole sole beneficiary through it
s stringent standards maintained all over the world.
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3. SWOT ANALYSIS
3.1 SWOT Analysis SWOT stands for strengths, weaknesses, opportunities, and th
reats. To meet the needs of the key market it is important to analyse the intern
al marketing strengths of the organisation. Strengths and weaknesses must be ide
ntified, so that a marketing strategy which is right for the business can be dec
ided upon. Once the strengths and weaknesses are determined, they are combined w
ith the opportunities and threats in the market place. This is known as SWOT ana
lysis. SWOT analysis is a tool for auditing an organization and its environment.
It is the first stage of planning and helps businesses to focus on key issues.
Once key issues have been identified, they feed into marketing objectives. Stren
gths

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

Core product line out of line with the trend towards healthier lifestyles for ad
ults and children. Product line heavily focused towards hot food and burgers. Lo
cations of outlets are sometimes not to closer to storage centres resulting in l
oss of quality. Seasonal. Quality issues across the franchise network. Break-eve
n sales can be generated after operating for certain number of years only.
Opportunities

Joint ventures with retailers (e.g. supermarkets). Consolidation of retailers li
kely, so better locations for franchisees. Respond to social changes - by innova
tion within healthier lifestyle foods. Its move into hot baguettes and healthier
snacks (fruit) has supported its new positioning. Use of CRM, database marketin
g to more accurately market to its consumer target groups. It could identify lik
ely customers (based on modelling and profiles of shoppers) and prevent brand sw
itching.
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Strengthen its value proposition and offering, to encourage customers who visit
coffee shops into McDonalds. Installing childrens play-parks and focus on educa
ting consumers about health, fitness. Continued focus on corporate social respon
sibility, reducing the impact on the environment and community linkages. Expansi
on into emerging markets of cities present in India. Focus on middle-class incom
e group customers with low-priced quality goods will enhance the profit margin.
Senior Citizens have been totally deprived of marketing strategy adopted by McDo
nalds. The burgers and eatables are more Indianized so that senior citizens fin
d it familiar but the introduction of more milky beverages would attract more se
nior citizens and kids.
Threats

Social changes - Government, consumer groups encouraging balanced meals, 5 a day
fruit and vegetables. Focus by consumers on nutrition and healthier lifestyles.
Competitive pressures on the high street as new entrants offering value and gre
ater product ranges and healthier lifestyles products. E.g. subway, supermarkets
, M&S. Recession or down turn in economy may affect the retailer sales, as house
hold budgets tighten reducing spend and number of visitors. Pressure groups - en
vironmental. Since McDonalds is a symbol of American cultural imperialism, it c
ontinues to face continue opposition from religious fundamentalists, protectioni
sts, animal rights activists, and anti-globalization protestors.
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4. MARKETING OBJECTIVES
A Marketing plan must be created to meet clear objectives. Objectives guide mark
eting actions and are used to measure how well a plan is working. These can be r
elated to market share, sales, and goals, reaching the target audience and creat
ing awareness in the marketplace. The objectives communicate what marketers want
to achieve.Long-term objectives are broken down into shorter-term measurable ta
rgets, which McDonald s uses as milestones along the way. Results can be analyze
d regularly to see whether objectives are being met. This type of feedback allow
s the company to change plans. It gives flexibility. Once marketing objectives a
re set the next stage is to define how they will be achieved. The marketing stra
tegy is the statement of how objectives will be delivered. It explains what mark
eting actions and resources will be used and how they will work together.
McDonalds plans to open as many as 140 restaurants throughout India this ye
ar, focusing on drive-through outlets. Investment of more than Rs.400 crore in t
he next two years to expand its operations. Transform itself into a high-volume,
mass-market brand with compounded annual growth at around 30 per cent to 35 per
cent in the next few years. Addition of franchisees as current 75% income gener
ated is from franchisee centers affiliated to McDonalds. Moving out of the metr
os and concentrate its efforts on other mid-sized cities in providing service. T
he plan is to enter a new city, understand the market and then multiply by openi
ng up more outlets in these cities rather than spreading to too many cities at a
time Increase the number of customers turning up at its restaurants around the
country by providing the same service and quality by achieving 100% customer sat
isfaction. Target on customers between age-groups 24-38 with childrens to posit
ion itself as a family restaurant and the ideal place for kids and teenagers. In
crease brand loyalty among customers. To build a new generation who will stay wi
th the brand and then emerge as a long-term player. Introduce new innovative men
us by development of new products, which cater to people s needs by keeping Indi
an tastes in mind and to provide greater choice whilst ensuring that the product
s meet the requirements of a balanced diet, so that the crowds keep pouring thro
ugh the doors.

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5. MARKETING STRATEGY
5.1 McDonalds Road Map for India 5.1.a Emphasis on Local Management: McDonald
s has given the adage of think global, act local a concrete shape in India. T
he companys localization strategy is clearly manifest in the critical area of m
anagement. McDonalds decided to set up two joint ventures on a 50:50 basis with
two local entrepreneurs in Mumbai and Delhi. In Mumbai, Amit Jatias company, H
ardcastle Restaurants Private Limited, was selected to own and manage McDonalds
restaurants in the western region. In Delhi, Vikram Bakshis Connaught Plaza Re
staurants Private Limited was chosen to own and manage McDonalds restaurants in
the northern region. Both Vikram Bakshi and Amit Jatia are responsible for runn
ing McDonalds in India. Vikram Bakshi has extensive background in real estate d
evelopment in Delhi, while Amit Jatia, a vegetarian, has a chemicals and textile
business background in Mumbai. It was not their backgrounds, however, that won
the confidence of the Big Macs management. Rather, it was their business plan e
mphasizing India-centric management strategies and their easy access to bureaucr
acy so critical to effective government relations building. 5.1.b Politically C
orrect Strategy: In the beginning, McDonalds was faced with two challenges of
the Indian market: (1) How to avoid hurting religious sensibilities of Indian co
nsumers; and (2) How to avoid political confrontation with Indian government and
political activists. McDonalds managers were well aware of the fact that polit
ical activists can create trouble for foreign-based fast food chains. The two lo
cal managing directors (Bakshi and Jatia) of McDonalds took a series of politic
ally correct strategies to deal with the initial challenges of the Indian market
. Since Indias majority of Hindus (80% of Indias population) revere cows as sa
cred and 150 million of Indian Muslims do not eat pork, beef and pork have been
a complete no-no from the start. Instead, McDonalds introduced a mutton-based
Maharaja Mac in India, as opposed to its flagship beef-based Big Mac elsewher
e.14 other itemssuch as the tantalizing McAloo Tikki Burger (breaded potato and
pea pattie)were added to the menu to lure Indias middle class. Approximately
75% of the menu available in McDonalds in India is Indianized and specifically
designed to woo Indian customers. 5.1.c Employment Opportunity India has come a
long way from opposing the entry of MNCs to encouraging them to expand their bus
iness operations in India. Today, every expansion move McDonalds makes is recei
ved well by government officials. An important reason for this shift in attitude
is the ability of the company to generate quality and long-term employment oppo
rtunities for Indians. McDonalds typically employs local people, and the averag
e McDonalds restaurant in India employs more than 100 people in all kinds of po
sitions- cashiers, cooks, managers, etc. Besides, every expansion also brings ad
ditional income and employment opportunities to Indias agricultural work force,
which is very pleasing to government officials.
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5.2 FORMULATING THE MARKETING STRATEGY: 5.2.1. Selecting the Target Market S
hifted from world-wide positioning of drive-in convenience and speedy-service. T
his world-class strategy is the latest element of overall plan to continue revit
alizing McDonald s for customers through compelling food choices, great service
and restaurant operations, motivating value and exciting new restaurant decors.
Segment: Each company identifies the parts of the market that it can serve best
and most profitably, which is called the segment of the market it wants to serve
. Market segmentation allows to divide a market into smaller groups of buyers wi
th distinct needs, characteristics, or behaviours who might require separate pro
duct or marketing mixes. McDonalds identified certain segment based on its geog
raphical and demographic segments. o Geographic Segmentation Geographic segmen
tation calls for dividing the market into different geographical units such as n
ations, regions, states, countries, cities, or neighbourhoods. McDonalds India
divided the country into different zones based on directions and concentrated pa
rticularly on North and West zone as its first market segment to attract on. o D
emographic Segmentation Demographic segmentation divides the market into group
s based on variables such as age, gender, family size, family life cycle, income
, occupation, education, religion, race, generation, and nationality. McDonalds
targeted different age groups from children and teens to adults upto age less t
han 30 years. Like its other worldwide locations, McDonalds targeted children a
s their main clientele in India.Children are an enormously powerful medium for r
elationship building in India. They not only influence markets in terms of the p
arental decision-making to buy certain kinds of products, they are also future c
onsumers. Thus, McDonalds has done everything possible to attract children. McD
onalds also attracted many jean-clad teenagers, who use the outlet as a venue t
o meet their friends circle, still a tricky issue among Indian middleclass famil
ies. Income segmentation was done to attract consumers from high income groups.
Target: A target market consists of a set of buyers who share common needs or
characteristics that the company decides to serve. McDonalds targeted young fam
ilies who are able to eat out, but the main focus was on to attract small childr
ens so that the whole young family follows after it. The possible target market
decided on was only 10% of the Indias population. As said by Vikram Bakshi from
North zone, We want to first concentrate on metros, then open branches in othe
r cities. We want to setup outlet only in cities where we can ensure the quality
of products. McDonalds followed concentrated marketing (or niche marketing),
a marketcoverage strategy in which a firm goes after a large share of one or a f
ew segments or niches. Different phases to move into target markets was schedule
d on
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o Phase I Focus on cities of relatively high incomes where citizens are expose
d to western food and culture. High-income urban dwellers are seeking variety in
their choice of foods and are willing to spend more on international cuisine, i
ncluding fast foods. o Phase II Move to smaller satellite towns (Gurgaon, Pune
). Positive spill-over effect of reputation from main metros. Other cities like
Jaipur, Agra were also targeted to attract foreign tourists who often visit them
as favourite tourist destinations. o Phase III Move on to crowd pulling cente
rs like malls, multiplexes, highways, railway stations and airports. o Phase IV
Introduce new low-priced products with same quality and service for middle c
lass income groups of people.
5.2.2. Positioning the Offer Mc Donalds mein hai kuch baat, a place for entir
e family to enjoy. Mc Donalds positioned for youth families. Positioning is abo
ut communicating the unique selling advantage or proposition to the target audie
nce in everything the firm does i.e., marketing, sales, and customer service. Th
e consistency helps our customer remember. Our marketplaces have lots of choices
. Too many, perhaps, for the average consumer to evaluate logically. With hundre
ds of choices in any given locale, many people simply look for a referral to a p
roduct or with professional services: a company that their friends trust. Those
who shop around consider two or three options and take the best of the three. Wi
th hundreds of choices, and with products and services that most consumers find
hard to differentiate, how do you set yourself, apart from the crowd? Positionin
g allows a marketer to think about why a customer would want to do business with
them. What do you offer that the other producers don t? What does a potential c
lient get by doing business with you, which will serve their needs well? Positio
ning has three components:

What are your strengths? Your distinctive competencies? What about your offering
s provide value to your customers? Who is your target customer? What about makes
them an ideal fit for the value you offer? How are you different from your comp
etitors in ways that your customers and potential customers will value? In other
words, what is your unique selling proposition? Your competitive advantage?
When all three are put together, we have a positioning statement. Positioning st
atements are the bases for all marketing messaging, sales scripts, and at a corp
orate level: branding. So here are the things we need to know to be able to deve
lop your own market positioning:
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Who are you? As a company? As a sales rep? What is your firm or known for? (Ask
people what they think. It may not be what your internal talk says it is. Is it
prompt claims? Or telling it like it is? Or it might just be everyone knows you.
) What do your customers appreciate about your products or services? (Ask your c
olleagues and your customers. Again, it might not be what you think. Maybe you a
re known for high quality. Or perhaps for returning calls promptly or your probl
em solving ability. Maybe it is just that you are convenient. ) What are you par
ticularly strong at? (These are your core competencies.) What are you better at,
than anyone else in your business? As a company? As a professional? As a sales
rep? (Quality? Innovation? Cost effective choices?) Who are your most satisfied
customers? What is it that they value most about what you have to offer? Based u
pon your sales goals and annual plan, who is your target market? The key here is
the fit between what you do well and who or what type of business needs what yo
u are good at. What value can you bring your customers that they will value the
most, based upon your unique strengths? At a company level, can you articulate t
his competitive value for your target, best customers? Does your branding reflec
t this? Do your communications use this messaging as its foundation?
o o o o

Are your web, collateral, and sales force attuned to this value? Do your service
s focus on this value? Does your customer service reflect this value? Does your
customer service reflect the promise of the brand? Or are customers continually
shocked that the customer service is not like the brand image at all?
Your customers are bombarded with hundreds - perhaps thousands - of commercial m
essages each day. Believe it or not buying your product or service is probably n
ot their most important priority. So, in the end, it comes down to relationships
. Does your vendor understand your needs? Thus, positioning is EVERYTHING, becau
se, positioning is that unique value you offer, to that target market you seek,
in ways that are better, more effective, more amazingly meeting your needs than
any of your competitors. And, the customer service, and employee relationships n
eed to MATCH or be INTEGRATED with the market positioning.
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Importance of Positioning: Marketing strategy that aims to make a brand occupy a
distinct position, relative to the competing brands, in the mind of the custo
mer. Firms apply this strategy either by emphasizing the distinguishing features
of their brand (what it is, what it does and how, etc.) or try to create a suit
able image (inexpensive or premium, utilitarian or luxurious, entry-level or hig
h-end, etc.) through advertising. Once a brand is positioned, it is very difficu
lt to reposition it without destroying its credibility. Develops Brand I
mage. Creates Demand. Creates Value In The Mind Of Customer. Commands Premium Pr
ice.
5.2.3. Assembling the Marketing Mix Assembling the marketing mix means assemblin
g the four Ps of marketing viz. product, price, place, and promotion, in the be
st possible combination. The marketing mix should be viewed as an integrated and
coordinated package of benefits that reflect the characteristics of customers a
nd various targeted publics and satisfy their needs, wants, and expectations. No
te that the elements of the marketing mix should be integrated because each elem
ent of the mix usually has some impact, direct or indirect, on the other three.
For example, if you improve the product or service you probably have to change t
he price because it costs more to produce. Although you may not have to change w
here the product is delivered to the customer, you will almost certainly have to
change the promotion or communication with the customer because you need to tel
l the customer about the changes you have made in the product and how the change
s will make it more desirable and satisfying.
The marketing mix principles (also known as the 4 Ps.) are used by business as
tools to assist them in pursuing their objectives. The marketing mix principles
are controllable variables, which have to be carefully managed and must meet the
needs of the defined target group. The marketing mix is apart of the organizati
ons planning process and consists of analyzing the defined: How will you
design, package and add value to the product? Product strategies. What pricing
strategy is appropriate to use? Price strategies. Where will the firm locate? Pl
ace strategies. How will the firm promote its product? Promotion strategies.
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Marketing strategies must feature customer orientation, input, and accessibility
in the fight to the top of the market. McDonald s is no different. An example o
f this is illustrated with a comparison of McDonalds and Wendy s. At first glanc
e, they may appear to have roughly the same marketing mix and target markets. Bo
th are fast food and provide similar products. However, looking closer, one can
recognize that McDonald s primary target market is children ages 3-11 and their
parents. McDonald s understood that the parent was making the purchasing decisio
n, most likely based on price. What McDonald s marketing executives did was inge
nious. They put an Rs.20 toy in with the hamburger, French fries, and drink and
gave it a special name, the "Happy Meal". Then McDonald s marketed the Happy Mea
l to the kids. If you have you ever asked your child where to buy a Happy Meal,
they will tell you that there is only one place you can buy one, and that is at
McDonald s has Ronald McDonald, playgrounds or PlayPlaces, "Happy Meals," and fu
n advertisements with brightly colored "Fry Guys" or the "Cheese Burgerler". Con
trastingly, Wendy s targets a more adult market and the restaurants represent a
more mature atmosphere with carpet floors and Dave Thomas advertisements. Wendy
s does have children s meals that offer a toy, but overall the atmosphere attrac
ts a different demographic group. McDonald s restaurants have a variety of strat
egies that apply to product, placement, promotion, and price that makes them one
of the most successful, well-recognized organizations in the world. A] Product
Strategies
Product Decision
Branding
Quality
Features
McDonald s marketing strategies should be looked at historically in order to see
the larger picture of the firm s success. There have been so many strategies si
nce the inception of the firm that it is difficult to account for them all, the
two most memorable are the development of the "Golden Arches" and "Ronald McDona
ld". These two icons have given customers a mental image of what to look for whe
n they want quality food for a low price fast. The firm revolutionized the fast
food industry and positioned itself as the market leader with low-priced, qualit
y food and provided an entertaining atmosphere for the children. These things we
re what that the market wanted at the time and the firm answered in spades. The
perceived secret of McDonald s success is the willingness to innovate, even whil
e striving to achieve consistency in the operation of its many outlets. The vege
tarian burger menu consists of the McAloo Tikki Burger. It is a vegetable burger
with potato, peas, and
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spices, tomato, onion, and a vegetable-tomato mayonnaise.McVeggie is another Veg
etarian burger on the menu. It looks similar to the above McAloo Tikki Burger, b
ut is made from mixed vegetables, peas, and spices, lettuce and veg mayonnaise (
referred to as Veg Sauce in India).Another new Menu Item added is the McSurprise
burger. It contains a patty, onion, Italian mayonnaise.There is also a Pizza Mc
Puff, consisting of a puff pastry stuffed with peas, sliced cheese etc. McDonald
s concentrated on studying the Indian culture, its value-systems and its influe
nce in food consumption decision making. It found that although a substantial pr
oportion of the populations were non-vegetarians, they stuck to mostly fish, mut
ton and chicken. Muslim took beef but though pig meat to be dirty; Hindus prefer
red neither beef nor pork; Christian took both beef and pork. McDonalds decided
, for the first time in their business history, to drop ham and beef burger from
their menu. 2 years back, they even excluded mutton burgers from their offering
s. McDonalds developed a menu especially for Indian with vegetarian selection t
o suite Indian taste. It introduced products like McTikki Aloo for the Punjabi t
aste buds. McDonalds has also re-engineered its operation to address the specia
l requirements of a vegetarian menu. The cheese and cold sauces used in India is
100 % vegetarian. McDonalds are committed for giving customers wholesome, heal
thy, and delicious food. They ensure that the cooking area as well as cooking eq
uipment for vegetarian products is visibly segregated from the non Vegetarian se
ctions. Whats moretheir crew members cooking vegetarian food items are identifi
able by their green aprons. Franchisees agree to operate their restaurants in th
e "McDonald s way" but there remains room for innovation. Many ideas for new men
u items come from franchisees responding to customer demand. To maintain consist
ency in the current menu while the firm tests new products to expand the product
line, McDonald s relies on test marketing new menu items in pilot locations. Ne
w products are rigorously market tested so that the franchisee will have a reaso
nable idea of its potential before it is added to the menu. The introduction of
new products, which have already been researched and tested, considerably reduce
s the risk for the franchisee. The franchisees additionally benefit from the ext
ensive national market research programs that assess consumer attitudes and perc
eptions. What products do they want to buy and at what price? How are they perfo
rming compared to their competitors? This approach allows the firm to identify w
hich items are likely to prove popular with consumers while ensuring that the co
mpany can deliver new products with consistent quality internationally. McDonald
s already has a history of doing this so it will not require major changes to i
ts operations strategy-at least initially. If the product line-up gets too large
, then the task of maintaining quality becomes exponentially harder. The trick i
s to consider how to eliminate some of the existing menu items when you introduc
e new ones, while making sure the staff is fully trained in how to execute these
products successfully. Restaurant chains encounter many obstacles in maintainin
g their business, but the most common obstacle is the logistical planning in get
ting food and supplies. McDonald s established warehouses within a reasonable pr
oximity to all of their restaurants to solve some of the logistical problems it
had experienced. This, along with owning the warehouses allows the restaurants t
o get all of the needs met in one shipment and not deal with multiple suppliers.
Suppliers are a critical part of the value chain. McDonald s considers product
quality to be the most important aspect and sets its standards among the highest
in the food industry built. The firm s mutual effort with suppliers and franchi
sees to develop and improve
13
products and production techniques enables McDonald s to meet the high quality s
tandards; thus sharing in the growth and success of the restaurant. This growth
and continued success, and the elimination of too many intermediaries, has allow
ed McDonald s to pass that value along to the customer.
B] Pricing Strategies Pricing is the only mix which generates a turnover for t
he organization. The remaining 3ps are the variable cost for the organization.
It costs to produce and design a product; it costs to distribute a product and c
osts to promote it. Price must support these elements of the mix. Pricing is dif
ficult and must reflect supply and demand relationship.
Penetration Skimming Competition Pricing Strategies Product Line Bundle Psycholo
gical
The customer s perception of value is an important determinant of the price char
ged. Customers draw their own mental picture of what a product is worth. A produ
ct is more than a physical item; it also has psychological connotations for the
customer. The danger of using low price as a marketing tool is that the customer
may feel that quality is being compromised. It is important when deciding on pr
ice to be fully aware of the brand and its integrity. A further consequence of p
rice reduction is that competitors match prices resulting in no extra demand. Th
is means the profit margin has been reduced without increasing sales. Worldwide,
McDonalds has achieved success by tapping middle-class households. But in Indi
a, while McDonalds has been able to get a larger share of rich and upper-middle
class population, it has not been as successful at effectively tapping the midd
le-class and lower middle-class segments. Capturing the latter segment is critic
al as McDonalds starts entering into smaller cities. But this section has mainl
y stayed away because of a widely prevailed perception that McDonalds is expens
ive. This is the reason why the company cut prices on its vegetable nuggets from
Rs 29 to Rs 19 and the soft service ice cream cone from Rs 15 to Rs 7 in 1997.
In September 2001, McDonalds offered its enormously popular shudh
14
shakahari (pure vegetarian) Veg Surprise (a veggie burger) for Rs 17. With this
price, McDonalds was able to sell the veggie burger 40% more than what it expec
ted within a month between September and October of 2001. In March 2004, McDonal
ds launched a Happy Price menu under which it sells four of its burger products
at Rs20 each. This has led to a 25% increase in customers. Clearly, the McDonal
ds strategy has been to increase sales volume of its products by making its pro
ducts available at an affordable price. A very popular punch line of McDonalds -
Aap ke zamane mein, baap ke zamane ka daam. The main reason of this price str
ategy was too attract the middle class & the lower class of people in India. Aft
er this not only the upper class prefers going there but all class of people go
there. The company strives to differentiate itself from other fast food restaura
nts by offering a variety of menu items that appeal to a variety of people from
those who just want great burgers, to those who just want a quick healthy meal.
Value Pricing
Happy meal Small burger ,French fries ,Coke + Toy Medium Meal Combo- Burger ,
French fries ,Coke-Veg Rs:75 ,Maharaja Mac Meal Rs: 95 Family Dines under Rs: 30
0 Prices lower than Pakistan, Sri Lanka, and 50% lower than U.S.
The most important reason for McDonalds pricing flexibility is its well-establi
shed supply chain arrangement, which ensures efficiency and speed in distributio
n. Besides, huge increases in volume sales and food processing technology have b
een helping the company to offset its cost.
15
C] Promotion Strategies A successful product or service means nothing unless t
he benefit of such a service can be communicated clearly to the target market. A
n organizations promotional mix can consist of:
Advertising Public Relation Sales Promotion Promotional Mix Personal Selling Dir
ect Mail Internet/E-Commerce
The promotions aspect of the marketing mix covers all types of marketing communi
cations. The methods include advertising, sometimes known as above the line ac
tivity. Advertising is conducted on TV, radio, cinema, online, poster sites and
in the press (newspapers, magazines).Key objectives of advertising are to make p
eople aware of an item, feel positive about it and remember it. The more McDonal
d s knows about the people it is serving the more it is able to communicate mess
ages which appeal to them Messages should gain customers attention and keep the
ir interest. The next stage is to get them to want what is offered. Showing the
benefits which they will obtain by taking action, is usually sufficient. The rig
ht messages must be targeted at the right audience, using the right media. The M
edia Magic You Deserve a break today, so get up and get away- To McDonalds Th
e above break commercial was one of the initial commercial themes adopted by McD
onalds United State which became the best known commercial song on television a
nd, in fact, the most identifiable advertising themes of all time. Needham was o
ne of the first advertising agencies of McDonalds which made many revolutionary
advertisements for the company. Needhams advertising formula became know in Mc
Donalds as Food, Folks, and Fun and it remains the backbone of all the chain
s advertising campaigns. McDonalds is now, one of the worlds mightiest consume
r marketers. Its brand valuation is $25 billion, making the ninth most valuable
brand in the world.
16
Why Mudra in India? DDB Needham and Leo Burnett are the advertising agencies of
McDonalds are worldwide. Hence, when they came to India, The subsidiary of both
the companies pitched for the account and Mudra the Indian partner of DDB Nee
dham got the account. Since the very beginning Mudra has been the advertising ag
ency of McDonalds India. The Mudra team meets up with McDonalds marketing team
on a regular basis and they have a debate and discussion on the new strategies
to be adopted. McDonalds uses various Medias like television, hoardings and bus
shelters. They are almost out of print ads. McDonalds also sponsor many Televi
sion Programmers like Kaun Banega Crorepati, Children shows etc. Even the pape
r Mats on the trays at the McDonalds are designed as per the ongoing Marketing
Strategy of McDonalds. For e.g.: During the French fries issues, all their Pape
r mats had description of the burgers, how the vegetarian products are made etc,
to regain the confidence of the customers. The placing of the pamphlets, banner
s in and around the outlets is decided upon by the area sales manager and the op
erations manager, in co-ordination with the restaurant manager. For e.g. : curre
ntly they have the Bugs Life Theme going on wherein they give free Bugs Life toy
s with the happy meal. All the outlets are decorated with the pictures of the to
ys and even the paper mats have pictures of the toys on them. The hoardings arou
nd the outlets carry the same theme. The 80-20 Menu Boards Even the menu counter
s in the outlet are a marketing tool for the company. They have to be designed s
uch that they catch the attention of the customer and tempt him to order the pro
duct. So McDonalds have menu boards that are descriptive as well as visual. The
y call it the 80-20 menu board eighty percent visual and twenty percent descript
ive. Under the recent research conduct by McDonalds they found that the consume
rs would have a clear remembrance of the 80-20 Board. This board also helps give
a feel of the product before it is purchased. Reconnecting with customers thro
ugh contemporary global marketing direction Im loving it. I am loving it re
fers an attitude we want your employees to embrace & reflect in their services.
McDonald s sees the use of these catch phrases and the use of the Golden Arches
as a very successful way of differentiating the restaurants from other fast food
competitors. McDonald s has taken price competition out of the picture because
the customer feels they have gotten quality, convenience, service, and value - a
nd McDonald s still makes you feel like you are getting a break in your hectic d
ay. Creating catch phrases are only one kind of promotion, and McDonald s uses m
any kinds of promotions to keep the restaurants at the top of the industry. Thei
r other lucky Promotion strategies were like: Collaboration with coke, M
TV, Hungama .com, Sony Music, etc. Scratch cards on large jumbo meals. Prices- c
aps, T-shirt, internet card, CDs, free tickets to Lucky Alis contest. Purchase
of 2nd meal in a month qualified for Opel Corsa/ NZ trip.
17
D] Placement Strategies McDonald s focuses on store placement and are always loo
king for the best locations. This strategy created some weakness in the last 10
years because it seemed that too many stores were put in some areas, cannibalizi
ng sales from the other McDonald s. The company has also made convenience a focu
s, not only through how fast it serves customers, but also in the location of it
s outlets. Freestanding restaurants are positioned so that you are never more th
an a few minutes away by foot in the city or by car in the suburbs. In addition,
McDonald s is tucking restaurants into schools, stores, and more.
Direct Distribution
Indirect Distribution
Manufacturer
Manufacturer
Consumer
Retailer
Consumer
Logistics play a critical role in McDonalds location strategy. As a part of its
Quick Service Restaurant (QSR) business, McDonalds has initially decided to op
en its outlets only within a 500-km radius of its main distribution centers in D
elhi and Mumbai. This is the reason why McDonalds has not opened a single outle
t in metropolitan cities like Kolkata in the eastern part of India, despite the
citys huge urban and cosmopolitan character. Besides Delhi and Mumbai, other pl
aces where McDonalds has opened up restaurants are satellite cities located nea
r Delhi (such as Noida, Gurgaon, and Faridabad), or Mumbai (such as Pune); place
s with tourist appeal (such as Jaipur, Mathura, and Shimla); and cities with an
eating-out culture (such as Ahmedabad, Chandigarh, and Bangalore). The McDonald
s outlet in Ahmedabad in the state of Gujarat is an interesting case. Ahmedabad
is largely a vegetarian city. But, like other metropolitan Indian cities, Ahmeda
bad has a significant number of eating-out customers. Given long lines of people
at the counter, it seems that McDonalds well-balanced menus of vegetarian and
non-vegetarian items has provided enough choice and space for customers of this
city. McDonalds has partnered with the state-owned oil company, Bharat Petroleu
m Corporation Ltd. (BPCL); to set up restaurants at the latters petrol stations
in and around Delhi to make it more convenient for automobile-driving consumers
. BPCL is the leading petroleum retailer in India and has the largest number of
petroleum stations in and around Delhi. It is important to note the shift in gov
ernment attitude toward MNCs that led to a successful partnership between McDon
alds and the largest state-owned company.
18
Keeping an eye on the huge potential for eating out venues for lower middle-clas
s Indians, McDonalds has partnered with a railway station and bus station in De
lhi to open its outlets: Delhi Metro Rail Corporation, and the overcrowded Delhi
s Inter-State Bus Terminus, where thousands of people pass through daily on the
ir way to different destinations. More importantly, to tap the automobile-drivin
g consumers, business travelers, and tourists, McDonalds has set up drive-throu
gh outlets in Delhi and along national highways. Two drive-through outlets on th
e Delhi-Agra and Mumbai-Pune highways have proven to be successful. The company
has plans to open more drive-through outlets in Delhi and Mumbai and along natio
nal highways - such as the Delhi-Jaipur highway, Delhi-Ambala highway, and Delhi
-Ludhiana highway. The move to set up these new restaurants has been driven by n
ew business prospects, logistics, and supply chain. In order to tap into the bus
iness of shopping mall and film-going customers, McDonalds has set up outlets a
t shopping malls and new multiplexes in metros like Delhi and Mumbai. The succes
s of its outlet at the Crossroads in Mumbai is evidence that a strategic locatio
n outside a mall can bring in customers in hordes. Given the premium pricing in
the shopping mall, it is not surprising to see that many people are content with
windowshopping at the Crossroads. But they do not mind spending a few rupees at
McDonalds for a burger or spicy fries. More important, families with children
are happy to spend at least 7 rupees to buy an ice cream for their children. Thu
s, while most shop-owners at the mall are hard-pressed to break even, the lines
at the McDonalds counters seem unending. A similar trend is seen at the newly o
pened multiplex in Delhis Vikaspuri.
19
6. PHYSICAL DISTRIBUTION AND LOGISTICS
A company the size of McDonald s requires the value chain to be increasingly imp
ortant. Not only does McDonald s want to add value for the customers, but also t
he firm looks for ways to improve the operations that makes McDonald s a more ef
ficient business. McDonald s is constantly striving to add value to the firm for
their customers, and in doing so, the firm has created efficiency in getting th
e products to the customers quickly and as fresh as possible. McDonald s is cons
tantly looking for ways to improve and is successful because of the continuous u
pdates on equipment, improvement on serving time, and in finding more ways than
one to satisfy customers. McDonald s value chain is unique because of the rare n
eed to depend upon other companies for supplies. The firm owns nearly every port
ion of the value chain including warehouses, delivery trucks, and the real estat
e where their restaurants built. Restaurant chains encounter many obstacles in m
aintaining their business, but the most common obstacle is the logistical planni
ng in getting food and supplies. McDonald s established warehouses within a reas
onable proximity to all of their restaurants to solve some of the logistical pro
blems it had experienced. This, along with owning the warehouses allows the rest
aurants to get all of the needs met in one shipment and not deal with multiple s
uppliers. This, of course, does not eliminate the need for suppliers, but it has
eliminated the need to coordinate paper products deliveries with meat deliverie
s. 6.1 Supply Chain Management Another critical strategy was to set up a well-es
tablished supply chain in India in order to achieve three objectives: (1) To ope
ration its globally practiced QSCV (quality, service, cleanliness, and value) p
rinciple; (2) To enjoy flexibility in pricing; and (3) To launch a new product w
hen necessary. To achieve these three objectives, McDonalds often uses an outso
urcing model in all its markets. In some cases, it also actively imports. But gi
ven Indias relatively higher import duties and foreign exchange fluctuations, M
cDonalds decided early on to source its raw materials from the local suppliers
to the maximum extent possible. Currently, McDonalds only imports the process c
ontrol equipment that allows it to dish out burgers and other orders within its
super-fast time frames. The company, however, sources 95% of its raw materials f
rom 38 local suppliers. Fresh lettuce comes from Delhi, Pune (Maharash
tra), Nainital, and Ooty (Uttar Pradesh); Cheese comes from Dynamix Dairies loca
ted in Baramati (Maharashtra); Buns come from Cremica Industries in Phillur (Pun
jab) and Shah Bector and Sons in Khopoli (Maharashtra); Pickles come from Global
Green Company in Hyderabad (Andhra Pradesh); Sauce comes from Bector Foods in P
hillur (Punjab); and
20

Chicken patties, vegetable patties, pies, and pizza puffs come from Vista Proces
sed Foods in Taloja (Maharashtra).
The entire supply distribution is the responsibility of AFL Logistics Ltd., a jo
int venture (50:50) between Airfreight and Coughlin in the U.S., and Radhakrishn
a Foodland (P) Ltd. in Thane, Maharashtra. AFL is responsible for temperature co
ntrolled movement of all products from suppliers to distribution centers. Settin
g up a well-coordinated supply chain was not easy, given Indias poor transporta
tion and storage infrastructure, as well as its lower-quality agricultural produ
cts. Thus, six years prior to the opening of its first restaurant in India, McDo
nalds and its international suppliers worked together with local Indian compani
es to develop products that meet the rigorous quality standards McDonalds deman
ds. An underlying principle in product development was to strictly adhere to the
Indian governments regulation on food, health, and hygiene and to exceed the g
overnments standards. To do so, McDonalds transferred its state-of-the-art foo
d processing technology to India, enabling Indian businesses to grow by improvin
g their ability to compete in todays international markets. McDonalds has work
ed with local Indian suppliers to consistently improve the quality and increase
greater yields of agricultural products. For instance, it helped farmers of Trik
aya Agriculture Company to grow high-quality lettuce year round in Ooty, Pune, D
elhi, and other regions. McDonalds shared with Trikaya advanced agricultural te
chnology and expertise like utilization of drip irrigation systems that reduce o
verall water consumption and agricultural management practices. For quality cont
rol, Trikayas post-harvest facilities now include a large cold storage facility
, a cold chain consisting of a pre-cooling room to remove field heat and large r
efrigerated vans with humidity controls. To ensure standardization and higher qu
ality, Vista International, which supplies the pies, nuggets, and vegetable and
chicken patties, built a new facility in 1996 with help from McDonalds. This ne
w facility has insulated panels, temperature control, and chill rooms. Vista Int
ernational has obtained American Institute of Bakers and Hazard Analysis Critica
l Control Points (HACCP) certification for quality standards. In some cases, Ind
ian companies like Dynamix Dairies had the technology but no market for their mi
lk derivative products. By associating with McDonalds Dynamix Dairies has seen
a regularly growing expansion of its market. Now, it not only supplies products
to McDonalds restaurants in India, but also has an export order of approximatel
y US$12 million per year. Radhakrishna Foodland (P) Ltd., which is responsible f
or getting products from various suppliers and delivering products to various Mc
Donalds outlets, has earned an excellent reputation in maintaining a tight del
ivery-on-time schedule. This is possible because of the companys installation
of enterprise resource planning (ERP) software, which provides data of what is s
elling where. This way, the company is able to anticipate demand in each retail
outlet and place orders with producers accordingly. With the help of McDonalds,
the company has set up a trucking fleet to move supplies to restaurants at shor
t notice. Each of the companys delivery trucks has three degrees of refrigerati
ona freezer section for meats, a cold refrigerator section for vegetables, and
a non-refrigerated section for paper
21
cups, napkins, and plastic cutlery. These ways, each truck delivers multiple ite
ms at one go and saves the company and restaurants a huge sum of transportation
cost. Radhakrishna Foodland distribution center also maintains high-quality stan
dards in cleanliness, including personal hygiene for the drivers, packing, and c
hecking temperatures of the food it transports to various restaurants. The compa
ny maintains detailed data logs to track the movement of each batch of food item
s. In case of a complaint about a food item at any McDonalds restaurants, the d
ata logs help the company to identify the batch from which the particular food i
tem came. Then the company issues a warning or decides to discontinue the batch
from which the food item came. This ensures a high-quality standard of food item
s delivered to each McDonalds outlet. Not surprisingly, the company has obtaine
d American Institute of Bakers and HACCP certification for quality standards. Su
ch meticulous planning in setting up a well-coordinated supply chain system has
paid rich dividends to the McDonalds operations in India. It has minimized cost
s, optimized quality control, and ensured higher customer satisfaction, which is
so very essential for the companys growth. More critically, the improved trans
portation and food processing technology seems to have served as an important ca
talyst for increasing Indias agricultural productivity while raising farmers i
ncomes. This has scored very well on the political front and won the government
s goodwill.
22
7. FUTURE ANALYSIS
McDonalds can use following promotional techniques which should be appropriate
to be used for increasing the sales: 1. Increase its product line. 2. To have mo
re variety to choose from, to include more deserts and more items. 3. To provide
better and quick service. 4. Lower the supply chain cost so that it helps in co
st reducing. 5. To expand their Happy Meal choices to attract and retain custome
rs. 6. To educate about healthy lifestyle. 7. Introduction of cafeterias serving
premium and specialty coffees and other beverages and other products such as ca
kes, pastries etc in the existing McDonalds. 8. Provide with better ambience. 9
. Focus on gifts for all generations i.e. youth, kids especially senior citizen
which is a completely new concept. 10. Special promotions during festivals as I
ndians tend to spend more at such events. 11. Increasing the space for provision
of birthday party areas. 12. Try to sponsor college festivals. 13. Work for soc
ial welfare of the society.
23
8. CONCLUSION
McDonald s marketing mix is strategic because of the diverse approaches that are
used. First, in identifying the "four P s" of marketing addressed earlier (prod
uct, price, promotion, and placement), research shows that McDonald s is very ca
reful in making decisions that effect each area and/or how each area effects the
other. McDonald s is concerned about how the firm will fulfil the needs and wan
ts of its customers and in the activities associated with maintaining the relati
onships with its stakeholders. McDonald s stakeholders include customers, franch
isees, suppliers, employees, and the local communities surrounding them. McDonal
d s has shown care for customers through the decisions to add more healthful foo
ds to the menus, by changing how products are packaged or how foods are prepared
, and by philanthropic contributions and sponsorships. Local adaptation, no doub
t, has contributed to McDonalds business growth in India. The restaurant has de
veloped competitive advantages in the industry of serving quality fast food at a
low cost. In addition to these decisions, the development of the Golden Arches
or Ronald McDonald has provided consumers with memorable icons that are associat
ed with quality, service, and value, just like the McDonald brothers and Ray Kro
c intended. McDonald s faces some difficult challenges in moving away from the f
ast food king to a more health conscious provider for customers who care about w
hat they eat. The keys to its future success will be maintaining its core streng
ths-an unwavering focus on quality and consistency-while carefully experimenting
with new options. The company s environmental efforts, while important, should
not overshadow its marketing initiatives. Though there are many opportunities fo
r this fast food giant, McDonald s must keep the strategic nature of its marketi
ng efforts to stay on top and provide what customers want.
24