mcdonald big project

7/27/2019 McDONALD Big Project

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Global Marketing Strategies

of McDonalds

We are lovin it !


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Table of Contents

S.No Content

1. Introduction

1.1 Environmental Analysis

Global Fast Food Industry

Survey Findings

Porters Five Forces ModelThe 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-7Ps

Positioning

Product

Price

Place

Promotion


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People

Processes

5. Research methodology

6. Research Analysis and findings

7. Recommendations

8. Conclusion9. Executive Summary10. Bibliography

11. Annexure


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Environmental

Analysis


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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 doesnt 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, accordingto 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.


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Asians - The Worlds Greatest Fast Food Fans

Top 10 Global Markets for Weekly Fast Food

Consumption

Market Percentage of Adult Population That

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%


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Survey Findings

Adult polulation eating at take away

restaurant atleast once a week

0%10%20%

30%40%50%60%70%

HongKong

Malaysia

Philippines

Singapore

Thailand

ChinaIndiaU.S.

Australia

NewZealand

Country

% Series1

Resistance to take away lifestyle

0

5

10

15

20

Asians Europeans

Region

% Series1


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Take away dinner

85

90

95100

australia

usa

vietnam

new

zealand

Country

%o

frespondents

infavour

Series1

Take away breakfast

62

64

66

68

70

72

Malaysia Hong Kong Thailand

Country

%ofrespondents

infavour

Series1


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Porters Five Forces ModelThe FastFood Industry

Threa

t of

New

Entra

nts

In the

recent

years

Global

Fast-

food

market

has

shown

tremen

dous

results

and the growing demand for fast food has been attracting many players. Market is full with

players like McDonalds, Wendys, 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.


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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 theindustry 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 McDonalds, 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 McDonalds

Wendys

Burger King


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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 rivalsBurger King, Wendys, and Taco Bellthe industry

encountered new challenges. Sonic and Rallys 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 Chilis had become potent competitors in the quick service field, taking dollars

away from McDonalds, which was firmly entrenched in the fast -food arena and hadnt done

anything with its dinner menus to accommodate families looking for a more upscale dining

experience.

Threat from Substitutes
http://www.adage.com/page.cms?pageId=688http://www.adage.com/page.cms?pageId=688


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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 tothe 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 consumers money. Recent years have witnessed a spurt in the number of local

restaurant outlets in almost every country.


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Company

Profile


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McDonalds BackgroundTwo brothers, Richard and Maurice McDonald founded McDonalds 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

McDonalds in the USA. Mr. Kroc offered a McDonalds 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 McDonalds 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, McDonalds

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, McDonalds 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 companys flagship product, the Big Mac. Throughout the 1970s,

McDonalds 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, McDonalds 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,

McDonalds introduced drive-thru window service, which allowed motorists to order and


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receive food from their cars. Nowadays, this type of business accounts for around half of all

McDonalds 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 Childrens 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.

McDonalds first international venture was in Canada, during 1967. Shortly afterwards,

George Cohon bought the licence for McDonalds in eastern Canada, opening his first

restaurant in 1968. Cohon went on to build a network of 640 restaurants, making McDonalds

in Canada more lucrative than any of the otherMcDonalds outside the USA.

The key to the international success of McDonalds 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.

McDonalds now has over 20,000 restaurants in over100 countries, and around 80 per cent are

franchises.


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McDonalds India

McDonalds 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 McDonalds 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

1997the first Drive Thru restaurant at Noida

1999the first Mall location restaurant at Ansal Plaza New Delhi2000the first highway restaurant at Mathura

2001the first thematic restaurant at Connaught Place

2002the first restaurant in a food court at 3Cs, Lajpat Nagar and the first restaurant at the

Delhi Metro Station at Inter State Bus Terminus

2003.the first Dessert kiosk,Faridabad(Harayana)

McDonalds 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.


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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.

McDonalds global strategy canbe summarized as strict quality and consistency standards,

innovation and continuous development, central promotional campaign and adaptability to

local environments.

The McDonalds 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 McDonalds business model is that it extracts huge revenues

from the real estatebusiness, unlike its competitors McDonalds owns many of its outlets and

collects rent for their use.

Over the years McDonalds has diversified their restaurant interests by operating fast food

chains under other brand names such as Aroma Caf, Boston Market, Chipotle Maxican Grill,Donatos Pizza and Pret A Manager.


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Global Marketing


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Global marketing steps can be broadly into:




Global Marketing Decisions

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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:

Operational Considerations

Strategy Advantages Disadvantages

Global Exploit experience curveExploit location economies

Lack of local responsiveness

Multi-Domestic Customized products No location economiesNo experience curve effectNo transfer of corecompetencies

International Transfer distinctivecompetencies

Lack of local responsivenessNo location economiesNo experience curve effect

DRIVING FORCES

TechnologyCultureMarket NeedsCostFree MarketsEconomic IntegrationPeaceManagement VisionStrategic Intent

Global Strategy and Action

RESTRAINING FORCES

CultureMarket Differences

CostsNational ControlsNationalismWarManagement MyopiaOrganization History

Domestic Focus


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Transnational Exploit experience curveExploit location economiesCustomized products

Global learning

Difficult to implement


Once the company decides on going global it must then think as to which country to go to. Forthis it weighs the attractiveness of the country along with the competency of the firm, resultingin a matrix as shown below;


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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 Matrixas shown below;


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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

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

Ethno

Poly

Regio Geo

Licensing Franchising

Strategic

Alliances

Joint

Ventures


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1)Ethnocentric OrientationCharacteristic of domestic & international companies

Opportunities outside the home market are pursued by extending variouselements of the marketing mix

Home country marketing practices will succeed elsewhere without adaptation;

international marketing is viewed as secondary to domestic operations

2)Polycentric OrientationCharacteristic 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 OrientationCharacteristic 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,


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EPRG APPROACHTHE

MCDONALDS CASE

Strategy Inter

dependence

Multi-Domestic

International

Global

Transnational

Low

Moderate

Hi h

Ver hi h

Costs of

Control

Low

Moderate

Hi h

Ver hi h

Philosophy

Pol centric

Re iocentric

Ethnocentric

Geocentric


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1. ManagementPolycentric + 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. PromotionPolycentric + Geocentric

The Im 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. ProductPolycentric

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. ResearchPolycentric

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.


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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 McDonalds must take into account before deciding upon entering amarket.

5. PlanningGolden Arches / Ronald

Im lovin it [Geocentric: change of language and colour]

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

representation of the slogan]

Im lovin itcampaign 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.

Im 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


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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, butthey 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


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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 toeconomically 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.


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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


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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.

McDonaldshas 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 isbecause 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.


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Objectives

And

Scope


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Objectives

1)Study of Global Marketing Strategies ofMcDonalds

2)McDonalds The Indian Case3)Evaluation of overall customer satisfaction of

foreign tourists in Delhi vis--vis that in their

respective home countries.

The main objective of the market research is to study: -

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.

The Consumer Perception towards

McDonalds Vis aVis in their home

country and India.


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LIMITATIONS


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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


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7 Ps


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Positioning

How a product differs from its competitors

In the words of Philip Kotler, positioning is The act of designing the companys 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 toconsumers 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 McDonaldsthe 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'sRestaurants

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. McDonaldsand Bellisio's (fast food chain) have created two very differentidentities 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.


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Positioning is more than branding. When you think of McDonaldsyou 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 theidentity.

According to AcNielsen market survey in 2003 showed that McDonald'swas 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'sintroduced 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'sfaces 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.


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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 Treacydefined 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 its a combination of all.


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Product


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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. McDonalds 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. McDonalds serves the world some of its favorite foods - World

Famous French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin.

Many of McDonalds ideas for reviving its global fortunes involve expanding beyond the

hamburger.


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One of the aims of McDonalds is to create a standardized set of items that taste the same

whether in Singapore, Spain or South Africa. The structure of the McDonalds menu remainsessentially uniform the world over: main course burger/sandwich, fries, and a drink along with

an overwhelmingly Coca-Cola.

McDonalds 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 adoptedby McDonalds. Adaptation is including consumer tastes/

preferences and laws/customs. There are many situations where McDonalds 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, McDonalds 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 newrange 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.


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McDonalds 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 McDonalds adapted the original menu to meet

customer needs/wants in different countries.

In tropical markets, guava juice was added to the McDonalds 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,

McDonalds introduced the Samurai Pork Burger with sweet sauce.

In the last two years in India, it has introduced some vegetarian and non-vegetarian productswith 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.


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Food Ingredients

Suppliers are dedicated to providing McDonald's with top quality material that is continuallymonitored for freshness and safety. McDonalds uses regional suppliers to ensure that the

freshness is delivered to customers in every product they buy.

Food quality is key at McDonalds. 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

McDonalds 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.


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Potatoes

McDonald's French fries are famous around the world. To make French fries, McDonalds

uses only the best potatoes available from their own potato farms. Their potato suppliers makemany 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.


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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 customers tray.

Their products are sourced from the highest quality ingredients, prepared hygienically and

treated to regular quality checks such as the McDonalds 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.


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Mcdonalds has always offered tea and coffee in their menu at their restaurants but recently

McDonalds has tied up with Coca - Cola to serve their Georgia Gold brand hot beverages in

their restaurants. McDonalds believes in providing variety and in keeping with this it tries toadd value to the customers eating out experience.

McDonalds 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. McDonalds introduced McSwirl as it

offers a fantastic product to consumers at a great price, which is basically a value addition.

Quality, Service, Cleanliness(QSC)

McDonalds uses the finest available products and carefully developed formulae. They al so

encourage their employees to check products that they prepare or serve. McDonalds 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. McDonalds firmly believe

that a smile does as much to bring a customer back as does the best food in the world.

McDonalds 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. McDonalds believe that through delivering great levels of QSC,

(Quality, Service, Cleanliness), 100% customer satisfaction can be achieved, enabling them to

become the customers favorite quick service restaurant.


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Price


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Pricing objective of McDonalds 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 McDonalds, price is probably the most important item that

can affect a companys sales and profitability. The main purpose of this P to set the price

level and measure its impact on McDonalds business model.

Pricing Decisions

Factors, which McDonalds 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 Kings and McDonalds price war.

Wendys I$ Burgre in the Australian market.

Nirulas, wimpy and local players in Indian market (like Keventers) in the

unorganized segment.


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Exchange rate

A firm engaged in international transaction cannot ignore the exchange rates whiledetermining the price level in the foreign market. In India McDonalds havent priced its

products as they have done in the European countries or for say USA or UK. In USA

McDonalds came up with the one$ burger but in India the company cannot price its burger at

this rate.

Pricing StrategiesMcDonalds

There are many ways to price a product. Let's have a look at McDonalds 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. McDonalds pricing

strategy is a combination of some, which are: -

Penetration Pricing


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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 McDonalds 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.

McDonalds 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 McDonalds

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

McDonalds 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.


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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) atmeal 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 entireincrease 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 inthe 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-builtincentive 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: -


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(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.

McDonalds has realized that, despite the cost savings inherent in standardizat ion, 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

McDonalds) from around the world. It succeeds in highlighting the point that McDonalds 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,

McDonalds 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 doess come toits pricing decision?

The process above sets out the basic framework that allows McDonalds to set localized

pricing.

This pricing strategy does not always work successfully, though, as was the case in the USA in

1997 when McDonalds 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, beganto 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.


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The official stance on McDonalds pricing policy is highlighted in the companys 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,

McDonalds can set the appropriate price for their products. In New Delhi, India, McDonalds

was looking at market penetration in October 1996, and set price through looking at Nirulas, 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 McDonalds in price is equal to or cheaper than its competitors in the fast food sector. The

remarkable thing is, however, that not only is McDonalds 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. McDonalds is talking mass, Indian style (and lovin' it )

Pricing Strategy of McDonalds = Perceived Value Pricing

Finally for a fast food restaurant what matters is that how the customers perceive the price.


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Place


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McDonaldss today is one of the worlds great entrepreneurial organizations, with four out

of every five restaurants worldwide run by an affiliate partner of the company or a

franchisee.

McDonalds 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

McDonalds has always been A Franchising Company. The McDonalds 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.

Licensing Franchising

Strategic

Alliances

Joint

Ventures


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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

McDonalds charge franchisees a levy on sales. This levy consists of a service fee of 4%,

and a rent charge of 7%. the McDonalds 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 McDonalds revenues. McDonalds can

also boast that it is the largest retail property owner in the world. .

McDonalds 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 companys 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.

0

20

40

60

80

100

1

Country

USA

UK


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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, realestate, 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.

McDonalds India

We serve around half a million customers on an average, in our restaurants across the

country every day.

McDonalds in India is a 50-50 joint venture partnership between McDonalds Corporation

[USA] and two Indian businessmen. Amit Jatias 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 yearsprior 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


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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 todays international markets.

For instance, Cremica Industries worked with one of McDonald's suppliers from Europe todevelop 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 balancebetween 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


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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 ones immediate suppliers and customers to encompass the entire chain, sincehidden 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 McDonalds 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 possiblelocal materials.

McDonald's hires local personnel for all positions within the restaurants


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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 fromBector 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 worlds 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 McDonalds 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. McDonalds 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 McDonalds 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.


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McCain Foods Pvt. Ltd. is the worlds 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 4continents (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

McDonalds 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 McDonalds 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.


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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 2 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 monthsbut 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 1 C and 4 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 2 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.


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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-distancetransportation 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 McDonalds 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.


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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 facilitieswith capability

to store products up to -22 C as well as delivery trucks to transport products at temperatures

ranging from room temperature to frozen state.


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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 thefinal 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 quickernot only benefit the economy but also help the farmer earn more.


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Promotion


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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, McDonalds 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 McDonalds as a global image, McDonalds

focuses on the needs of the communities they are entering. In a communications context, the

maxim ``brand globally, advertise locally is the McDonalds promotional strategy.

Advertising

Ronald loves McDonalds and McDonalds food. And so do children, because they loveRonald.

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. McDonalds constantly


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advises its marketing and advertising department to do everything they can to appeal to

childrens love for Ronald and McDonalds

McDonalds has a wide range of advertising campaigns in various countries. For example, inthe 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; McDonalds just uses

different personalities in different cultures to get their message across.

In East Asia, McDonalds 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 McDonalds acting more locally was when in Beijing, China, the

companys male mascot, Ronald, was paired with a female companion known as Aunt

McDonald, whose job it was to entertain children. Once more, this show s how McDonalds

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, McDonalds 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


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local consumer. A leaflet comparing the Hong Kong fast food industry saw McDonalds

adverts as: Promoting McDonalds as a local institution, with a clear stake in the overall health

of the community.In 1994, McDonalds changed their advertising slogan to ``Theres nothing quite

like aMcDonalds. This saw McDonalds 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 McDonalds to add to the whole ``McDonalds experience and

to add to their image as a global brand.

Public Relations

A feature of the localization of McDonalds in Beijing is that, in contrast to the US practice of

substituting technology for human workers, the Beijing McDonalds 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 McDonalds 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 McDonalds does adopt a global strategy. In January

1997, McDonalds 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 McDonalds producing toys in their ``happy meals for films such as A Bugs Life, Toy

Story and the latest Disney offering, Tarzan. In this instance, there was no need for

McDonalds to act local, asWalt Disney has a world-wide appeal that does not need alteringfor different communities.

Similarly, another global public relations exercise is the Millennium Dreamers Global

Childrens recognition programme which is being presented in conjunction with McDonalds,


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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

McDonalds sponsors a vast array of sports, on both a national and a global scale. Globally,

McDonalds 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 McDonalds message is easily conveyed. The Olympic

Games has also been a valuable advertising tool.

Nationally, McDonalds targets specific events with which it would like to be associated. In

the USA, McDonalds has strong links with the NBA (National Basketball Association) and

NASCAR racing, two hugely popular sports in the USA. McDonalds 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 g

mcdonald big project

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