MARKETING STRATEGY of

McDonald's in

INDIABY - Aakash Khandelwal (2012IPG001) Anshika Singh (2012IPG017)Himanshu Meena (2012IPG043) Manish Kumar (2012IPG056 )

ABV- Indian Institute of Information Technology and Management, Gwalior

INTRODUCTION

• McDonald's is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries across more than 36,000 outlets.

•  Founded in the United States in 1940, the company began as a barbecue restaurant operated by Richard and Maurice McDonald.

• Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth

• McDonald's primarily sells hamburgers, cheeseburgers, chicken, French fries, breakfast items, soft drinks, milkshakes, and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies, fruit, and seasoned fries

Facts About McDonald`sSource – Business Insider

VISION

“The world’s best quick service restaurant experience.”

To achieve their vision they are focused on three world wide strategies:• Be the best employer for people in each community around the world.• Deliver optional excellence to customers in each restaurant.• Achieve enduring profitable growth by expanding the brand and leveraging the

strengths of McDonald’s system through innovation and technology.

McDonald's History in INDIA• Entered in India 1996• McDonald's India is a 50 –

50 JV partnership between Mcdonald’s Corporation (U.S.A) and two Indian businessman Amit Jatia and Vikram Bakshi

• Trained extensively with their Indian management team in Indonesia and US before launch

• The entire menu was changed

Consumer AnalysisCustomer Characteristic:• India is the second most populated country in the world. It has 28 states and

almost 4 times the population of USA. India has more than one billion population.• Three fourth of Indian population lives in Urban areas. Though per capita income is

very low in India but still people like to spend on costly products and eating out. • Consumers in India are highly family oriented. McDonald's targets high income

earner, middle income earner and lower middle income earner in India.• Indian consumer are getting brand awareness through internet, TV, Newspapers,

Radio, Magazine etc. • Middle income group is getting bigger in size day by day as a result of economic

boost in India and that is very good news for McDonald's.• Indian consumers are now getting environmental awareness and like to use Eco

friendly products

• Family system gives a big chance for McDonalds to get their sale rise as Indians are buying food in bulks.

• Indian consumers are becoming very open minded which is a positive sign for McDonalds.

• For McDonalds to succeed as they are now, they should go to expand in urban areas as well as rural areas and target middle and lower income earners and beside this they should introduce certain products which can beafforded by low income earners.

• Customers like spicy foods and McDonald has introduced many products which are spicy and tasting according to the preference of Indians.

Low Income49%

Lower Middle Income

30%

Middle Income

12%

Upper Middle Income

5% High Income4%

Income Distribution

Low Income Lower Middle IncomeMiddle Income Upper Middle IncomeHigh Income

Consumer Analysis

MARKETING MIXProduct

In India McDonalds has a diversified product range focusing more on the vegetarian products as most consumers in India are primarily vegetarian.

Price

In India McDonalds classifies its products into 2 categories namely the branded affordability(BA) and branded core value products (BCV).

Place

McDonald’s outlets are very evenly spread throughout the cities making them very accessible.

.

Promotion

At McDonalds the prime focus is on targeting children. In happy meals too which are targeted at children small toys are given along with the meal.

Other Factors which also affects are : • People • Process • Physical

evidence

• The marketing mix is apart of the organizations planning process and consists of analyzing the defined:

• How will you design, package and add value to the product?Product strategies.

• What pricing strategy is appropriate to use? Price strategies.

• Where will the firm locate? Place strategies.

• How will the firm promote its product?Promotion strategies.

• Locations• Logistics

• Service levels• Channel members• Channel

motivation• Market

coverage

• Advertising• Personal selling• Public relations• Message• Media• Budget

• List price• Discounts

• Allowances• Financing

• Leasing options

• Functionality• Appearance• Quality• Packaging• Brand• Warranty• Service/Support

Product Price

Promotion

Placement

MARKETING MIX

Marketing Mix : Product• McDonald’s places considerable emphasis on developing a menu which customers

want. Market research establishes exactly what this is. • However, customers’ requirements change over time. In order to meet these

changes, McDonald’s has introduced new products and phased out old ones, and will continue to do so. Care is taken not to adversely affect the sales of one choice by introducing a new choice, which will cannibalize sales from the existing one (trade off).

• McDonald’s knows that items on its menu will vary in popularity. Their ability to generate profits will vary at different points in their cycle.

• In India McDonalds has a diversified product range focusing more on the vegetarian products as most consumers in India are primarily vegetarian.

• The happy meal for the children is a great seller among others.

• McDonald's commitment to its Indian customers is evident even in development of special sauces that use local spices and chilies.

• The mayonnaise and all other sauces are egg-less. McDonald's also pioneered the establishment of Cold Chain across India which helps maintain freshness and nutrition in every product.

• McDonald's regular scrumptious menu includes wide range of products like McAloo Tikki, Filet-O-Fish, Spicy Range, Chicken McGrill, McVeggie, Veg Pizz a McPuff, Chicken Mcnuggets, Fries, Wraps, an assortment of Sundaes, Soft Serve and refreshing beverages such as Ice Tea & Cold Coffee with outstanding service in a vibrant and lively ambience, for which McDonald's is known worldwide. 

• McDonald's had further reinforced the branded affordability mantra via the introduction of the Happy Price Menu which starts at Rs 25 only.

Marketing Mix : Product

Marketing Mix : Product & Price

Marketing Mix : Price• Pricing strategy is one of the most significant aspects when it comes to marketing. Thisincludes price breakdown, when any discount service or payment available.Pricing strategy was developed in order to attract middle and lower class individual and the result can clearly be seen the customer base which McDonalds has at present.

• McDonald’s restaurant has specific value pricing as well as bundling strategy like combomeal, happy meal, family meal and happy price menu in order to improve total sales of theservice and product.

• In India McDonalds classifies its products into 2 categories namely the branded affordability(BA) and branded core value products (BCV).

• The BCV products mainly include the McVeggie and McChicken burgers that cost Rs 50- 60 and the BA products include McAloo tikki and Chicken McGrill burgers which cost Rs20- 30. This has been done to satisfy consumers which different price perceptions.

Marketing Mix : Promotion• The promotions aspect of the marketing mix covers all types of marketing

communications.• One of the methods employed is advertising, Advertising is conducted on TV,

radio, in cinema, online, using poster sites and in the press for example in newspapers and magazines.

• Other promotional methods include sales promotions, point of sale display, merchandising, direct mail, loyalty schemes, door drops, etc. The skill in marketing communications is to develop a campaign which uses several of these methods in a way that provides the most effective results. For example, TV advertising makes people aware of a food item and press advertising provides more detail. This may be supported by in store promotions to get people to try the product and a collectable promotional device to encourage them to keep on buying the item.

• At McDonalds the prime focus is on targeting children. • In happy meals too which are targeted at children small toys are given along with

the meal. Apart from this, various schemes for winning prices by way of lucky draws and also scratch cards are given when an order is placed on the various mean combos

Marketing Mix : Place• Place, as an element of the marketing mix, is not just about the physical location ordistribution points for products. It encompasses the management of a range of processesinvolved in bringing products to the end consumer. McDonald’s outlets are very evenlyspread throughout the cities making them very accessible. Drive in and drive through optionsmake McDonald’s products further convenient to the consumers.

• Place plays very important role in launching a product and making it successful. McDonald's has expanded through out in India Urban areas.

• McDonald is currently targeting urban areas as we know that big part of population is living in urban areas. Place doesn’t only include physical location but it is includes all the processes that eventually leads to product ending in customers hand.

• Place plays very important role in getting priority over the rivals and place should be selected after research on the local demography, income level and customers preferences.

• McDonalds in India chooses a particular place after long research and checking local area’s demographic characteristics, income level etc. This is the reason McDonalds is very successful in India.

Marketing Mix : Other Factors• People : The employees in McDonalds have a standard uniform and McDonalds

speciallyfocuses on friendly and prompt service to its customers from their employees.

• Process : The food manufacturing process at McDonalds is completely transparent i.e. thewhole process is visible to the customers. In fact, the fast food joint allows its customers toview and judge the hygienic standards at McDonalds by allowing them to enter the areawhere the process takes place. The customers are invited to check the ingredients used infood.

• Physical evidence : McDonalds focuses on clean and hygienic interiors of is outlets and atthe same time the interiors are attractive and the fast food joint maintains a proper decorumat its joints.

Micro Environmental Issues: Porter`s Five Force Model

Threat of New Entrants or New Entry (Moderate Force)Low switching costs (strong force)Moderate capital cost (moderate force)High cost of brand development (weak force)

Threat of Substitutes or Substitution (Strong Force)

High substitute availability (strong force)Low switching costs (strong force)

High Performance-to-cost ratio (strong force)

Bargaining Power of McDonald’s Suppliers (Weak Force)Large number of suppliers (weak force)Low forward vertical integration (weak force)High overall supply (weak force)

Bargaining Power of McDonald’s Customers/Buyers

(Strong Force)Low switching costs (strong force)

Large number of providers (strong force)High availability of substitutes (strong force)

Competitive Rivalry or Competition with

McDonald’s(Strong Force)

High number of Firms (strong force)

High aggressiveness of Firms (strong force)Low switching costs

(strong force)

Micro Environmental Issues: Porter`s Five Forces Model

Threats of Substitute:

• The substitutes in this industry are very high.

• People can choose variety of products they can either choose Burger King, KFC, Indian Cuisine, Indian local shops, Indian Vegetarian restaurants etc.

• Entry to a restaurant Business is very difficult. It is hard to make a prominent brand name.

• There is high research and development costs and high cost of entry.

• Strong brands already in competition make it more difficult such as McDonald's, Pizza Hut, Domino’s etc.

Threats of New Entrance:

Rivalry• Fast food restaurant

industry is very competitive.

• The competition is so high as all the organizations want to get hold of customer

• McDonald's knows about the customers taste and preferences all over the world.

• McDonald's is providing quality food from early morning till late night in order to get competitive edge In the market.

:.

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Micro Environmental Issues: Porter`s Five Forces Model

Bargaining power of customers

• Bargaining power of customers refers to pressure a customer can exert on a business to get good quality of food, good customer service and low price.

• Bargaining power of customer in this industry is low. As McDonalds provide a standard service, one price strategy and quality of food.

• Customers have low bargaining power through out the food industry

Bargaining power of supplier

• Bargaining power of buyer in this industry is low. Situation can change if the main ingredients are not available.

• But with McDonald's simple menu and working with many supplier ,they are not facing a big threat.so the bargaining power is relatively low.

Analysing Macro Variable

• India is quite rich as far as the political structure and policies are concerned that is the reason why international organizations face difficulties when they are entering in India. In the similar manner it can be said that India is a nationalist country that is the reason why they create difficulties for international entrants. However, there are certain other factors like consumer taxation, different political infrastructures and the scenario of the global market.

• Political parties are against fast food chains as they want to see only vegetarian restaurants in their country. Their party members always protest against fast food using meat in their menu.

• Good news is that India is changing slowly from nationalistic society to liberal mind set up and McDonalds expanded very fast in the last decade.

Political Influences:

• Economical variables such as currency exchange,employment,Interest rate, tax ratio and need of international supply.

• Most of the organization's depend on foreign supply of raw materials for their products making.

• Currency exchange also have a great impact on any organization.• Business for McDonalds for India with high unemployment rate, dealing in Rupees

as currency and millions of people living below poverty line is a concern for McDonalds. But India is having a booming economy, low tax rate and availability of labor in abundance and development of middle class society in India is a positive sign for McDonald's future.

ECONOMICAL INFLUENCE:

Sociocultural influences:• In India society is very versatile. Though India is heavily populated but still Hindu’s don’t

eat meat.• Muslims only eat Halal and they don’t eat pork. In India religion has a very big impact on

society. For McDonalds it is a big concern.• But in India life style is changing, earning power is increasing, middle class is getting

bigger in its size and people like to eat outside in restaurants this has a very good impact on society.

• However, the social factors that are associated with McDonalds in India are the suppliers and the workforce of the organization is fragmented and they are diversified.

• In the similar manner McDonalds have to face the pressure of different social and ethnic groups that are prevalent in the socio culture environment of India.

• However, the favorable element for McDonalds is that people of India will get employment through this organization and this would be favorable for both McDonald sand the local citizens of India.

Technological influence:• One positive benefit of globalization was technological advancement. • Although McDonald's doesn’t use too many complicated machines in their food

production but still they need highly competitive technology. • Technology is needed for example in supply chain management, order taking,

Inventory control, easy and quick payment procedures .Use of technology can make management more reliable, effective and cost saving in short term as well as long term.

• Customers happiness after getting what they are looking for on time and in a disciplinary way make them come over and over

• In India as franchises they use high technology. They use very good till system, good an disciplined order taking and well managed staff who knows the proper use of technologies inside the store.

McDonalds USP

• McDonald's mein hai kuch baat. (Oct. 13, 1996–1999)

• Toh aaj, Mmmmmmmmmm! McDonald's ho jaye.Har choti khushi ki celebration  (1999–2003)

• I'm lovin' it (2003–present)

** VIDEOS

STP

Segments• Demographic : Kids,

Families, Teenagers• Psychographics:

Convenience of life style

Targeting• Children and Youth• Young Urban Families• Vegetarian Fast food

Eaters

Positioning• Happy Price menus• Toys along with meal• WiFi facilities are being

provided• No beef , No Pork

Competitive Scenario in India• The industry of fast food business in India is quite competitive and these

competitors offer direct andindirect competition to McDonalds.

• In India McDonalds face a tough scenario because there are certain other international chains that also offer tough competition to McDonalds . These international competitors are Pizza Hut, KFC, Dominos Pizza, and Subway. However, Indians prefer their local manufactures and that is the reason why the local fast food chains are growing in numbers that are also giving competition to McDonalds.

• The local fast food chains in India are Hyderabad House, Ohri’s, Jumbo King, Narula’s etc. The competitors that are present in India are quite diverse in many aspects as this can be considered as one of the biggest issue for McDonalds.

• In the similar manner it can also be said that in India the competitors are so diverse that they compete in aggressively and in certain scenarios they also compete in non price dimensions like innovation, marketing, etc.

Competitor`s AnalysisMCD vs JUBLFOOD

Source – Yahoo Finance

Competitor`s AnalysisMCD vs YUM

Source – Yahoo Finance

Competitor`s AnalysisMCD vs CPG

Source – Yahoo Finance

Competitor`s AnalysisMCD vs SBUX

Source – Yahoo Finance

Competitor`s AnalysisMCD vs Jumbo VadaPav

• Local Competition• Burgers vs VadaPav• McD has higher Scalability but Jumbo has authenticity

Indicators of Success• One gratifying aspect of McDonald’s success was the fact that, by mid-2000, it derived as

much as 50 per cent of its revenues from vegetable food items, thus disproving its critics – especially those who were skeptical of its ability to serve food that suited Indian palates.

• To exploit the opportunities created due to its better brand awareness and customer acceptance, McDonald’s was following a three-pronged strategy: increase the seating capacity in existing outlets to cater to additional traffic; open new outlets in Mumbai and Delhi; and, finally, penetrate new cities.

• McDonald’s was also in talks with Delhi Metro Rail Corporation, Airports Authority of India, Indian Railways and Delhi Development Authority to open smaller McDonald’s outlets in airports and railway stations, among others.

• McDonald’s also had plans to set up several outlets along the Delhi-Agra national highway in a tie-up with a major petroleum refining and marketing organization.

Break Even AnalysisMcDonald's India achieved its break even from 48 stores in India, in year 2003.India has emerged as

one of McDonald's top ten operations in terms of average transactions per day in each of its outlets and McDonald's stores in India average around 1,500 transactions per day during 2003.

The key features of McDonald`s at that time were – • McDonald's added 13 outlets in India during '02 and another 15 was added in year, and

aimed to achieve the target of 100 Mac stores by '05 after achieving break even in 2013.• During the point of breakeven McDonald's outlets stands at 46. McDonald's is really bullish on

was the highway chain, which started to pick up after private players begin setting their petrol filling stations.

• In Year 2003, McDonald's already had two outlets on the Delhi - Mathura and Delhi - Ludhiana highways. According to the sources - On an average, 2000 people stop at each of those stores every day.

• Almost 75% of core products in India don't exist anywhere and India has exported a number of recipes to the parent's operations in other countries. These include, pizza McPuff, wraps and Aloo Tikki burger, which were doing exceptionally well in the Middle East.

Strategies of McDonald :An OverviewEntrance Strategies:• In order to capitalize on the highly price sensitive economy, and the Indian

mentality of liking anything that is foreign, McDonald’s strategy was market penetration and the three circles strategy. This led to localization & branding of the company.

• They had to suit their burgers to Indian taste and Indian market which was a hyper price sensitive market.

Training Strategies• .Induction training was conducted at the time of an employee’s joining the

organization. • This was done through interactions as well as through exposure with the

customer through operation training within the restaurants for a fixed period of time.

• The organization also provided numerous opportunities of overseas training to those displaying potential.

Strategies of McDonald :An OverviewSupply Chain Strategies• In the process, McDonald’s actually encouraged entrepreneurship, by

introducing the local suppliers to its global suppliers. This association involved transfer of state-of-the-art food processing technology, thereby leading to an improvement in quality standards and helping create world class manufacturing facilities in India

• In the five-and-a-half years until start-up, McDonald’s spent as much as Rs 500 million (US$12.8 million) to set up a supply network, distribution centres and logistics support. By mid-2000, some estimates placed the total investment in the supply chain at almost Rs 3 billion.

Major Reasons for McDonalds Success1. The SystemThis is the first thing that makes McDonald's so successful, by having an effective and efficient system in place, which exploits the minimum wage labor available, in the form of young teenagers who are just looking to make some cash or pick up fundamental job skills.2. ConvenienceThe second reason why McDonald's is so popular is because it's everywhere. There a McDonald's at every corner of the map, at every major shopping centre, district, highway, freeway, every place which attracts even, remotely more than 10 people, will have a McDonald's restaurant not too far from them.3. Likability and FamiliarityThe Golden Arches, the Big M. Ronald McDonald, happiness and fun; all these are the associations with McDonald’s which makes it so familiar4. The MenuMcDonald's has one of the most diverse menus, targeting all ages from little kids to old pensioners, and everyone else in between.

Conclusion• McDonald’s recognized the unique problems and opportunities of the Indian

market.  The company then took its time, adapting its products and just as importantly its corporate strategy, and has been hugely successful since. 

• At the same time, the company cannot afford to become complacent and rest on its laurels.  Any future missteps, however small, could ruin McDonald’s efforts and hard fought gains in the country, allowing the company’s rivals to catapult past them and onto even greater success.

• In order to sustain in a very competitive market McDonald’s has to continuously think of bringing in new concepts into all its operations especially in marketing.

• The result of a spontaneous thought led to the introduction of breakfast outlets and a chance encounter with a technology specialist ended up with online booking orders and birthday parties and signature outlets.

• The success of McDonalds in India could be measured by its continuous growth in Indian fast-food market with 210 branches across India