International Business Management THESIS THESIS ON ON MARKETING STRATEGIES ADOPTED BY “MC DONALD’S” Submitted In Partial Fulfillment of the Requirement for the Award of Master of Business Administration (IB) (2006-2008) SUBMITTED BY: Chandan Kumar MAHARSHI DAYANAND UNIVERSITY 1
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
International Business Management
THESISTHESIS
ONON
MARKETING STRATEGIES ADOPTED BY “MC DONALD’S”
Submitted In Partial Fulfillment of the Requirement for the Award ofMaster of Business Administration (IB)
(2006-2008)
SUBMITTED BY:
Chandan Kumar
MAHARSHI DAYANAND UNIVERSITYROHTAK
1
International Business Management
ACKNOWLEDGEMENT
I am sincerely thankful to all those people who have given me any kind of assistance
in the making of this project report.
I express my gratitude to “Mr. XYZ'' who has through his vast experience and
knowledge has been able to guide me, both ably and successfully towards the
completion of the project.
I express my gratitude to Mr. ABC. I would hereby, make most of the opportunity by
expressing my sincerest thanks to all my faculties whose teachings gave me
conceptual understanding and clarity of comprehension, which ultimately made my
job more easy. Credit also goes to all my friends whose encouragement kept me in
good stead. I am also thankful to authority of McDonald’s for providing me the
information.
Last but not the least I would like to acknowledge my gratitude to the respondents
without whom this survey would have been incomplete.
(Chandan Kumar)
2
International Business Management
PROJECT OUTLINE FOR THESIS
TitleA study on “Marketing strategies adopted by
McDonald’s” (with particular reference to franchisee
restaurant,)
Name of the CompanyMcDonald’s
ChairmanMr. JACK M.GREENBERG
Address
HARDCASTLE RESTAURANTS PVT. LTD,
ASHIANA, 69-C, BHULABHAI DESAI ROAD,
MUMBAI-400026.
Specific Areas of Study MARKETING & INTERNATIONAL BUSINESS
STRATEGIES.
RESEARCH METHODOLOGY
(a) Primary DataPersonal Interview and Structured Questionnaires
(b) Secondary DataAnnual Reports & Brochures, Business Magazines &
articles from internet
3
International Business Management
INDEX
Sl. No. Topic Page No.
1 Synopsis 1-2
2INTRODUCTION
“The Indian Fast Food Market - An Overview”3-4
3 INTRODUCTION TO PROBLEM 5-6
4 Objectives & scope of the study
Research Objective
Scope Of Study
7-8
5 Research methodology
Research Design
Sample Design
Data Collection
9
6 THEORETICAL CONCEPT
Industrialization Of Services Business Model
Gap Analysis
Gap Analysis And New Products
Usage Gap
Product Gap
Competitive Gap
Market Gap Analysis
10-18
4
International Business Management
7DATA ANALYSIS & INTERPRETATION
Mcdonald's Corporation
Mcdonald's Worldwide
Mcdonald's India
Marketing Strategy
Use Of Sub-Strategies At Mcdonald's
Job Structure
Training And Education
Mcdonalds India Supply Chain
Corporate Social Responsibility
Present Position Of Fast Food Industry
Major Players In This Field
Domino’s Diversity Mission Statement
A Brand With Bite
Economical
Porters Five Forces Model With Reference To Fast Food
Joints
Marketing Scenario At Mcdonald’s
Segmentation
Customer Relationship Management
International Business Strategies of Mcdonald’s
Policy And Functional Strategies
Financial Analysis/Ratio Analysis
Cost Analysis
Environmental Analysis Of “Mcdonald’s”
External Environmental Analysis
19-82
8 Data Analysis, Findings And Observations From
Questionnaire
83-99
9 Conclusions 100
9 Recommendations 101-105
5
International Business Management
10 Limitations 106
11 Bibliography 107
12 Annexure 108-111
6
International Business Management
SYNOPSIS
Over the past few years the Indian economy has undergone drastic changes- changes
that have had the market flooded with multinationals and a variety of products. There
has been a sudden upsurge in the Indian industry and exponential growth in specific
industries. Today’s companies work in a war zone of rapidly changing competitors,
technological advances, new laws, managed trade policies and diminishing customer
loyalty.
In today’s world of cutthroat fierce competition, customer satisfaction is very
essential to not only exist but also to excel in the market. Today’s market is
enormously more complex. Henceforth, to survive in the market, the company not
only needs to maximize its profit but also needs to satisfy its customers and should try
to build upon from there.
The project title “Marketing strategies and International Business strategies adopted
by McDonald’s” is the analysis of the service Quality level of fast food industry. This
project involves the service level provided by McDonald’s and its competitors. The
survey was conducted so as to analyze the service quality prevailing in the current
industry and the improvement that can be made upon it.
Market research study has been conducted in order to bring out the picture of service
quality that exists in this industry and the difference in service quality that exists in
the market. Like what are the customer’s preferences about the hospitality provided
by the fast food industry.
7
International Business Management
After this a comprehensive and comparative analysis has been made and conclusion
has been made keeping in mind the detailed analysis of the findings, which has been
collected through the market research.
8
International Business Management
INTRODUCTION
“The Indian Fast Food Market - An Overview”
Up to the year 1995, Indian fast food market was predominantly dominated by the
traditional dhabas, potential restaurants in the customer’s locality and some
restaurants in a five star hotels. Having fast food i.e., burgers, pizzas etc., was
considered to be an option for eating out. It was not at all synonymous with the
American concept of fast food as a quick takeaway bite or a substitute for lunch.
Apart from this fast food being available at the local restaurants and at some five star
restaurants, Nirulas was the only fast food chain existing in the country with its
restaurants expanding with every passing year since its inception. It has been almost
50 years now since its set up and there is hardly any one who doesn’t know about
Nirulas existence. Nirulas was the first one to bring fast food to India back in the 50’s
since then it has evolved into an eating-place with tremendous brand equity and brand
recognition. It proved to be a perfect eating-place for an average middle class who
wants to eat out at an affordable price that can’t afford the five-star restaurants and
would not want to go to the local dhabas.
Nirulas almost had a monopoly for decades due to the way it has been positioned. It is
a place where a person from an average middle class group to upper class group can
go to eat out. Its popularity has increased over the decades. With the trends changing
and the incomes rising almost anybody who can afford to eat out could go for snacks
at Nirulas.
However the year 1995-96 witnessed a drastic change. 1996 is considered to be the
year of India’s entry into the world food market. International giants such as
9
International Business Management
McDonalds, KFC, TGIF, Dominos, and Pizza Hut all bombarded the Indian fast food
market. Before these, UK-based joint called Wimpy’s had established its chain in the
country in 1990. By year 1996 it had about three to four joints established in Delhi.
However it did not pose much of a threat to Nirulas reason being lack of variety and
that Wimpy’s was looked at more of a hangout place rather than eating out with the
family. Each of the foreign food joints that have come into the country have their own
strategy lined up to differ from the rest. Each of these studied the Indian tastes and
style and thereby targeted the Indian customer. An average Indian restaurant goes is
no convenience eater, unlike the Americans.
Customer is paying for food that tastes good (Spicy, soft, savory etc.), not for how
pleasantly the stuff is served or how spotless the windows are, and wants good food
for that can make him come back to the restaurant. An Indian food joint owner would
definitely understand this but an American company, which comes and places itself
directly without knowing the customer, is definitely in for trouble. Customer loyalty
in a restaurant business is essentially low. A customer when comes to a restaurant
usually looks at the quality of food, variety, ambience, speed of delivery and the
location. The variety would influence the frequency of visits since taste is a
dominating factor to the Indian customers.
Almost all the fast food chains both Indian i.e., Nirulas and foreign i.e., McDonalds
etc., are targeting the families. This serves to be an advantage because the turnaround
time is short and family has higher propensity to spend because different members
order larger variety of dishes. Each of these restaurants delivers quality, value and
services in its own way through its line of strategies. The emphasis is on the value that
the restaurant is delivering to the customers.
10
International Business Management
INTRODUCTION TO PROBLEM
In today’s era of Privatization and Globalization, as the economy is opening up the
disposable income available per person is also increasing which in turn is increasing
the use of fast good restaurants to get quick and hassle free meal. The fast food
segment has witnessed a sea change over a past few years; virtually every big
corporation in the world is busy tying a knot with the Indian partner. Hordes of
multinationals and a couple of new Indian entrants are rushing headlong into markets.
As a service is any act or performance that are party can offer to another that is
essentially intangible and does not result in the ownership of anything its production
may or may not be tied to a physical product. In Indian Fast food segment there is a
Service gap in Ultimate consumer satisfaction and Fast food service providers.
Service gap is a factor that causes the unsuccessful delivery. These are five gaps that
cause the unsuccessful delivery:
Gap between consumer expectation and management perception.
Gap between management perception and service quality specification and service
delivery.
Gap between service delivery and external communication
Gap between perceived service and expected service.
11
International Business Management
PRESENT POSITION OF THIS INDUSTRY IN RESPECT TO
SERVICE GAP
Gap between consumer expectation a management perception: -
While the management of pizza hut perceives that the consumers need better
quality food, but the consumers may a clinically want better ambience, (Like,
light, music) or work floor area.
Gap between management perception Service-quality specification:-
The “fast” service provided by McDonald goes very well with its customer
perceptions. Here the negotiation has perceived well what the customer wants but
the main area where it lacks is that it has not specified its customer “how to serve”
or “what quality to be served”.
Gap Between service quality specifications & service delivery:-
The delivery personnel in McDonald are mainly fresh graduates without a
personal degree in “hotel management”. If prospective customer visits except who
recognize restaurant will find what have shown in media and what visible here is
not same causing a difference.
Gap between perceived service and expected service:-
The customer of McDonald and Nirula’s want free home delivery but presently
they are not providing, whereas Pizza Hut is providing home delivery to these
customers.
After this analysis we will come to know that there is service gap in this industry
and there is ample scope for improvement.
12
International Business Management
OBJECTIVE & SCOPE OF STUDY
RESEARCH OBJECTIVE
The primary objective of study was Marketing Strategies adopted by “Mc Donald’s”.
This objective is supported by four secondary objectives, achieving them will lead to
the fulfillment of primary objective. They include:
To find the service quality prevailing at McDonalds:
To find out the service quality of McDonalds in the various areas and finding out
the deficiencies prevalent in expected level of service.
To Compare Service quality of Competitors vis-à-vis McDonalds:
Comparing the service quality of McDonald along with that of Nirulas’, Pizza Hut
and other competitors.
To find out the areas of improvement for McDonald’s:
To find out the ways by which McDonald’s can improve upon its service quality
and bring more satisfaction to customers and thus add value to its bottom line.
To study the marketing strategies of McDonald’s.
To study how McDonald’s sell their product & what they do in achieving their
goals.
13
International Business Management
SCOPE OF STUDY
This will lead to certain implications for the company as company can formulate its
future strategies in order to increase their sales. Researcher had tried going in detail
and studying the use of fast foods from different angles so as to analyze the issue from
360 degrees. The research tries to develop an understanding on the aspect on the
whole which will help in understanding the market potential McDonalds in a holistic
view.
14
International Business Management
RESEARCH METHODOLOGY
RESEARCH DESIGN
The research process is carried out according to a designated series of steps required
to be taken in a chronological order. Fundamental to the success of any research
project is sound research design. It is the framework or plan for a study that guides the
collection and analysis of data.
The research design used for this project is exploratory in nature. The major emphasis
is on the discovery of ideas. The exploratory study is also used to increase the analyst
familiarity with the problem under investigation.
SAMPLE DESIGN
Target population: Customers who regularly visit the fast food restaurants.
Sampling unit: Delhi market is treated as sampling unit.
Sample size: 50 Customers
DATA COLLECTION
Primary Data: It will be collected from the customer’s visiting the restaurants
(McDonald’s) with the help of questionnaire, personal interviews of the staff
(McDonald’s).
Secondary data: It will be collected from the Newspaper Secondary data has been
collected from the company’s information brochure and Internet.
15
International Business Management
THEORETICAL CONCEPTS
Marketing is the flow of goods and services from the producer to consumer. It is
based on relationship and value. In common parlance it is the distribution and sale of
goods and services. Marketing can be differentiated as:
1. Marketing of products
2. Marketing of services
Marketing includes the services of all those indulged may it be then the wholesaler
retailer, Warehouse keeper, transport etc. In this modern age of competition marketing
of a product or service plays a key role. It is estimated that almost 50% of the price
paid for a commodity goes to the marketing of the product in US. Marketing is now
said to be a term which has no particular definition as the definitions change
everyday.
Services marketing is marketing based on relationship and value. It may be used to
market a service or a product. Marketing a service-base business is different from
marketing a product-base business. There are several major differences, including:
The buyer purchases are intangible
The service may be based on the reputation of a single person
It's more difficult to compare the quality of similar services
The buyer cannot return the service
Service Marketing mix adds 3 more p's, i.e. people, physical environment, process
service and follow-through are keys to a successful venture.
16
International Business Management
The major difference in services marketing versus regular marketing is that instead of
the traditional "4 P's," Product, Price, Place, Promotion, there are three additional
"P's" consisting of People, Physical evidence, and Process. Service marketing also
includes the servicescape referring to but not limited to the aesthetic appearance of the
business from the outside, the inside, and the general appearance of the employees
themselves. Service Marketing has been relatively gaining ground in the overall
spectrum of educational marketing as developed economies move farther away from
industrial importance to service oriented economies.
"Managing the evidence" refers to the act of informing customers that the service
encounter has been performed successfully. It is best done in subtle ways like
providing examples or descriptions of good and poor service that can be used as a
basis of comparison. The underlying rationale is that a customer might not appreciate
the full worth of the service if they do not have a good benchmark for comparisons.
Developing a marketing strategy is much the same for products and services, in that it
involves selecting target markets and formulating a marketing mix. Thus, Theodore
Levitt suggested that "instead of talking of 'goods' and of 'services', it is better to talk
of “tangibles and 'intangibles”. Levitt also went on to suggest that marketing a
physical product is often more concerned with intangible aspects than with its
physical properties. Charles Revson made a famous comment regarding the business
of Revlon Inc.: “In the factory we make cosmetics. In the store we sell hope”.
17
International Business Management
INDUSTRIALIZATION OF SERVICES BUSINESS MODEL
The industrialization of services business model is a business model used in strategic
management and services marketing that treats service provision as an industrial
process, subject to industrial optimization procedures. It originated in the early 1970s,
at a time when various quality control techniques were being successfully
implemented on production assembly lines.
Theodore Levitt (1972) argued that the reason the service sector suffered from
inefficiency and wide variations in quality were that it was based on the craft model.
Each service encounter was treated as an isolated event. He felt that service
encounters could be systematized through planning, optimal processes, consistency,
and capital-intensive investments. This model was the foundation of the success of
McDonalds and many other mass service providers in the 1970s, 80s, and 90s.
Unfortunately, the application of assembly line techniques to service provision had
several undesirable consequences. Employees found working under these conditions
disempowering, resulting in low morale, high staff turnover, and reduced service
quality. One of the most difficult aspects of this model for employees to deal with was
the "smile incentives". Employees were instructed to put a smile on their face during
the service encounter. This manufacturing and commercialization of apparent
happiness has been criticised by many commentators, particularly Mundie (1987).
Also many customers prefer the "personal touch".
By the early 1990s most service providers turned their attention back to the human
element and personalized their services. Employees were empowered to customize the
service encounter to the individual characteristics of customers.
18
International Business Management
GAP ANALYSIS
In business and economics, gap analysis is a business resource assessment tool
enabling a company to compare its actual performance with its potential performance.
At it's core are two questions:
Where are we?
Where do we want to be?
If a company or organization is under-utilizing resources it currently owns or is
forgoing investment in capital or technology then it may be producing or performing
at a level below its potential. This concept is similar to the base case of being below
one's production possibilities frontier. This goal of the gap analysis is to identify the
gap between the optimized allocation and integration of the inputs and the current
level of allocation. This helps provide the company with insight into areas that have
room for improvement. The gap analysis process involves determining, documenting
and approving the variance between business requirements and current capabilities.
Gap analysis naturally flows from benchmarking and other assessments. Once the
general expectation of performance in the industry is understood it is possible to
compare that expectation with the level of performance at which the company
currently functions. This comparison becomes the gap analysis. Such analysis can be
performed at the strategic or operational level of an organization.
“Gap analysis' is a formal study of what a business is doing currently and where it
wants to go in the future”. It can be conducted, in different perspectives, as follows:
Organization (e.g., human resources), Business direction, Business processes,
Information technology. Gap analysis provides a foundation for measuring investment
of time, money and human resources required to achieve a particular outcome (e.g. to
19
International Business Management
turn the salary payment process from paper based to paperless with the use of a
system).
Note that GAP analysis has also been used as a means for classification of how well a
product or solution meets a targeted need or set of requirements. In this case, 'GAP'
can be used as a ranking of 'Good', 'Average' or 'Poor'.
GAP ANALYSIS AND NEW PRODUCTS
The need for new products or additions to existing lines may have emerged from the
portfolio analyses, in particular from the use of the Boston Growth-share matrix or the
need will have emerged from the regular process of following trends in the
requirements of consumers. At some point a gap will have emerged between what the
existing products offer the consumer and what the consumer demands. That gap has to
be filled if the organization is to survive and grow.
To identify the gap in the market, the technique of gap analysis can be used. Thus an
examination of what profits are forecast to be for the organization as a whole
compared with where the organization (in particular its shareholders) 'wants' those
profits to represent what is called the planning gap this shows what is needed of new
activities in general and of new products in particular. The planning gap may be
divided into four main elements:
USAGE GAP
This is the gap between the total potential for the market and the actual current usage
by all the consumers in the market. Clearly two figures are needed for this calculation:
Market potential
20
International Business Management
Existing usage
Market potential: The most difficult estimate to make is that of the total potential
available to the whole market, including all segments covered by all competitive
brands. It is often achieved by determining the maximum potential individual usage,
and extrapolating this by the maximum number of potential consumers. This is
inevitably a judgment rather than a scientific extrapolation, but some of the macro-
forecasting techniques may assist in making this estimate more soundly based. The
maximum number of consumers available will usually be determined by market
research, but it may sometimes be calculated from demographic data or government
statistics. Ultimately there will, of course, be limitations on the number of consumers.
For guidance one can look to the numbers using similar products. Alternatively, one
can look to what has happened in other countries. The maximum potential individual
usage, or at least the maximum attainable average usage (there will always be a
spread of usage across a range of customers), will usually be determined from market
research figures. It is important, however, to consider what lies behind such usage.
Existing usage: The existing usage by consumers makes up the total current market,
from which market shares, for example, are calculated. It is usually derived from
marketing research, most accurately from panel research such as that undertaken by
A.C. Nielsen but also from 'ad hoc' work. Sometimes it may be available from figures
collected by government departments or industry bodies; however, these are often
based on categories which may make sense in bureaucratic terms but are less helpful
in marketing terms. The 'usage gap' is thus:
21
International Business Management
USAGE GAP = MARKET POTENTIAL – EXISTING USAGE
Many, if not most marketers, accept the 'existing' market size, suitably projected over
the timescales of their forecasts, as the boundary for their expansion plans. Although
this is often the most realistic assumption, it may sometimes impose an unnecessary
limitation on their horizons. The original market for video-recorders was limited to
the professional users who could afford the high prices involved. It was only after
some time that the technology was extended to the mass market.
In the public sector, where the service providers usually enjoy a `monopoly', the usage
gap will probably be the most important factor in the development of the activities.
But persuading more `consumers' to take up family benefits, for example, will
probably be more important to the relevant government department than opening
more local offices. The usage gap is most important for the brand leaders. If any of
these has a significant share of the whole market, say in excess of 30 per cent, it may
become worthwhile for the firm to invest in expanding the total market. The same
option is not generally open to the minor players, although they may still be able to
target profitably specific offerings as market extensions. All other `gaps' relate to the
difference between the organization's existing sales (its market share) and the total
sales of the market as a whole. This difference is the share held by competitors. These
`gaps' will, therefore, relate to competitive activity.
PRODUCT GAP
The product gap, which could also be described as the segment or positioning gap,
represents that part of the market from which the individual organization is excluded
because of product or service characteristics. This may have come about because the
market has been segmented and the organization does not have offerings in some
22
International Business Management
segments, or it may be because the positioning of its offering effectively excludes it
from certain groups of potential consumers, because there are competitive offerings
much better placed in relation to these groups. This segmentation may well be the
result of deliberate policy. Segmentation and positioning are very powerful marketing
techniques; but the trade-off, to be set against the improved focus, is that some parts
of the market may effectively be put beyond reach. On the other hand, it may
frequently be by default; the organization has not thought about its positioning, and
has simply let its offerings drift to where they now are. The product gap is probably
the main element of the planning gap in which the organization can have a productive
input; hence the emphasis is on the importance of correct positioning.
COMPETITIVE GAP
What is left represents the gap resulting from the competitive performance. This
competitive gap is the share of business achieved among similar products, sold in the
same market segment and with similar distribution patterns - or at least, in any
comparison, after such effects has been discounted. Needless to say, it is not a factor
in the case of the monopoly provision of services by the public sector. The
competitive gap represents the effects of factors such as price and promotion, both the
absolute level and the effectiveness of its messages. It is what marketing is popularly
supposed to be about.
MARKET GAP ANALYSIS
In the type of analysis described above, gaps in the product range are looked for.
Another perspective (essentially taking the `product gap' to its logical conclusion) is
to look for gaps in the 'market' (in a variation on `product positioning', and using the
23
International Business Management
multidimensional `mapping'), which the company could profitably address, regardless
of where its current products stand.
24
International Business Management
DATA ANALYSIS & INTERPRETATION
McDonald's CORPORATION
McDonald's is the largest and best-known global foodservice retailer with more than
30,000 restaurants in 121 countries. Yet on any day, even as the market leader,
McDonald's serves about one billion people, which is less than one percent of the
world's population. It claims to open on an average of three outlets every 24 hours at
some place or the other in the world. Their outstanding brand recognition,
experienced management, high-quality food, site development expertise, advanced
operational systems and unique global infrastructure position the company to
capitalize on global opportunities. More than 70% of McDonald's restaurants
worldwide are owned and operated by independent local men and women. Is one of
the worlds most well-known and valuable brands and holds a leading share in the
globally branded quick service restaurant segment of the informal eating-out market
in virtually every country in which they do business. Serves the world some of its
favorite foods - World Famous French Fries, Big Mac, Quarter Pounder, Chicken
McNuggets and Egg McMuffin.
McDonald's WORLDWIDE
History: Two brothers V Richard and Maurice McDonald pioneered McDonald's in
the year 1948 at California, USA. They converted their bar-be-cue drive in with
carhops into limited menu, self-service drive in. Later on seeing the success, the two
brothers were having in running the outlet, Raymond Albert Kroc (1902-1984), also
known as Ray Kroc, at the age of 52 years bought the exclusive franchising rights for
USA in the year 1954 and hence came the McDonald's Corporation into existence.
Ray Kroc opened the first McDonald's restaurant in Des Plaines, Illinois in 1955 now
25
International Business Management
no longer a functioning restaurant, but the building is now a museum containing
McDonald's memorabilia and artifacts. The company, since then, has been built
worldwide on the concept of franchisee having about 70 percent of its outlets owned
and managed by people who are its franchisees. About 14 percent of McDonald's
$14.2 billion worldwide sales for the year 2006 came from Asia alone. Presently, the
company plans to expand their leadership position through great tasting food, superior
service, everyday value and convenience. This is gauged by the fact that the
company's efforts to increase market share, profitability and customer satisfaction
have produced good return to shareholders - a total compounded annual return of 12
percent for the ten years ended December 31, 2006.
CORPORATE VISION McDonald's vision is “To be the world's best quick service
restaurant experience”. Being the best means providing outstanding Quality, Service,
Cleanliness and Value, so that every customer in its every restaurant smiles. To
achieve this vision, the company is focused on three worldwide strategies:
Be the Best Employer: The Company believes that to give its customers, the best
quick service restaurant experience it is necessary for them to first give its employees
the best experience. So to pursue its belief, McDonald's has put down in writing its
people's vision and peoples belief:
1. People's Vision to be the best employer for our people in each community around
the world. Peoples Promise we value you, your growth and your contribution.
2. Deliver Operational Excellence: Deliver operational excellence to our customers
in each of our restaurants.
26
International Business Management
3. Achieve Enduring Profitable Growth: Achieve enduring profitable growth by
expanding the brand and leveraging the strengths of the McDonald's system
through innovation and technology. This helps in expanding the range of
opportunities for all the people - employees, owner operators and suppliers - to
freely invest human capital, ideas, energies, expertise and time.
CORPORATE MISSION: To leverage the unique talents, strengths and assets of
our diversity in order to be the World's best quick service restaurant experience.
McDonald's INDIA
1. A locally owned Company: McDonald's started its Indian operation in the year
1996 under the franchisee ship method. It has two joint venture partners in India:
Connaught Plaza Restaurants Pvt. Ltd. a Delhi based 50:50 joint venture with
McDonald's for its operations in North India. It is headed by Mr. Vikram Bakshi.
Till date it has 100 outlets in and around Delhi, including one each in Noida,
Delhi-Mathura highway, and Delhi-Jaipur highway.
Hardcastle Restaurants Pvt. Ltd. a Mumbai based 50:50 joint venture with
McDonald's for its operations in West India. It is headed by Mr. Amit Jatia. The
company sources all its food products from the local suppliers. It also has a
research and development department, which tries to incorporate the new and
innovative food product into its menu after intensive research catering wholly to
the taste of the local customers. Like in India, the company has renamed its world
famous Big Mac burger to Maharaja Mac and incorporated major changes to its
contents by using mutton instead of beef for its Indian customers.
27
International Business Management
2. 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 inputs from local suppliers. McDonald’s
constructs its restaurants using local architects, contractors, labour and - where
possible - local materials. McDonald’s hires local personnel for all positions
within the restaurants and contributes a portion of its success to communities in
the form of municipal taxes and reinvestment. Nearly 98% of the inputs are
sourced from the domestic market. McDonald’s sources food products from local
companies. Mutton patties are supplied by Al-Kabeer Hyderabad, fresh lettuce
comes from Pune, Ooty, Maharashtra and Dehradun; cheese from Dynamic
Dairies, Baramati, Maharashtra; sesame seed buns and sauces from Cremica
Industries Phillaur, Punjab, and pickles from VST Natural Foods, Hyderabad,
Andhra Pradesh.
3. Setting Up of an Extensive Food Chain: For three years before 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 vigorous quality standards. These standards also strictly adhere
to Indian Government regulation on food, health and hygiene. Part of this
development involves the transfer of state-of-the-art food processing technology,
which has enabled Indian business to grow by improving their ability to compete
in today’s international markets. For instance, Cremica Industries worked with
another McDonald’s supplier from Europe to develop technology and expertise,
which allowed Cremica to expand its business from baking to also providing
bread and batters to McDonald’s India and other companies. Another benefit is
28
International Business Management
expertise in the areas of agriculture, which allowed McDonald’s and its suppliers
to work with farmers sharing, advanced agricultural technology and expertise like
utilization of drip irrigation systems, which reduce overall water consumption, and
agricultural management practices which result in greater yields.
4. Respect for the Indian Customers and Culture: McDonald’s worldwide is well
known for the high degree of respect to the local culture. McDonald’s has
developed a menu especially for India with vegetarian selections to suit Indian
tastes and culture. Keeping in line with this McDonald’s does not offer any beef
or pork items in India. McDonald’s has also re-engineered its operations to
address the special requirements of a vegetarian menu. Vegetable products are
prepared separately, using dedicated equipment and utensils. This separation of
vegetarian and non-vegetarian food products is maintained throughout the various
stages of procurement, cooking and serving.
5. Community Partnership: McDonald’s believes in giving back to the
communities it serves. Wherever McDonald’s goes it becomes a part of the
community it operates in and contributes towards the development of the locality.
McDonald’s has introduced the concept of ‘Litter Patrol’ - McDonalds’s
employees go around the immediate vicinity of the restaurant every day, packing
up garbage left behind not only by customers from McDonald’s restaurants but
also by other visitors to the area resulting in a cleaner neighborhood.
6. Quality, Service, Cleanliness and Value: The McDonald’s philosophy of QSCV
is the guiding force behind its service to the customers. All its suppliers adhere to
Indian government regulations on food, health and hygiene while continuously
29
International Business Management
maintaining McDonald’s own recognized standards. All McDonald’s products are
prepared using the most current, state-of-the-art cooking equipment to ensure
optimal level of quality and safety. Working on “Customer first” policy
McDonald’s India provides fast and friendly service - the hallmark of McDonald’s
which sets its restaurants apart from others. McDonald’s restaurants provide a
clean, comfortable environment especially suited for families via McDonald’s
stringent cleaning standards, carefully adhered to. McDonald’s menu is priced at a
value that the largest segment of Indian consumers can afford. McDonald’s does
not sacrifice quality for price - rather McDonald’s leverages economies of scale to
minimize costs while maximizing value to customers.
30
International Business Management
MARKETING STRATEGY
The first step in developing a marketing strategy is to understand your customers,
enabling reaction to their changing needs and the changing dynamics of the market.
To this end, McDonalds conducts several stages of in-depth customer research and
audits of its brand. The research involves both quantitative and qualitative research
methods. This research tells us a lot about how McDonald's is perceived and about
trends that are taking place in the market. They also conduct research into the local
area of their restaurants, into the general market environment, and into specific areas
of their business (children for example).
1. Competitive Pricing: Being in touch with the pricing of its competitors allows
McDonald's to price its products correctly, balancing quality with value.
2. Competitive Promotion: Before McDonald's communicates with it's customers it
must be aware of what its competitors are communicating so that it can create a
beneficial difference between itself and them.
3. Competitive Place: Distribution is key to any retailer or brand.
4. Competitive Product: Quick Service Restaurants are constantly expanding their
menus. This can be done on a short-term promotional basis or as a long-term
expansion strategy. Innovative marketing strategies clearly drive a business such
as McDonald's. But the marketing program is not simply about food. They use it
to enhance the customers experience, build the overall perception of McDonald's
in the market place as the eat out restaurant of first choice and to let people, who
perhaps have not yet experienced McDonald's, know what the company can do for
31
International Business Management
them and how the McDonald's experience continues to evolve to satisfy what the
customers are asking them for.
5. Operational Mission: To provide product and service to the customers,
maintaining the:
Quality: Only the best ingredients
Service: Friendly, pleasant, fast and efficient
Cleanliness: The highest standard for all the family
Value: Great food at great prices, combined with the unique
McDonald's
For this McDonald's Corporation has provided each franchisee with a detailed
operations manual and the latter are supposed to adhere them strictly. The
operations manual consists of:
1. Pre-opening procedures
2. Supplies and inventory
3. Supplier
4. Administration
5. Quality
Besides this the franchisees are supposed to go through the course at Hamburger
University, USA that helps them prepare for the operation in their part of the
world. Every minute detail is given in the menu items, exacting measures for all
32
International Business Management
recipes and the way it is to be served is also mentioned in the manual. McDonald's
puts a great stress on the cleanliness and the quality of the food and takes care that
the franchisee is strictly following to the operations manual. For this purpose, a
team of people from McDonald's international meets all the outlets once in 4
months.
6. Back end operations at the outlet: The back end operations at the McDonald’s
restaurant are similar to the shop floor of a factory with separate spaces allocated
to the various operations. It is basically divided into two parts - the basement level
and the floor level.
The Basement level: the floor space at the basement level is divided into a walk-in
chiller used for storing ice creams; a walk-in freezer maintained at 0 to -10F is used
for storing vegetarian and non-vegetarian food items; a coke dispensing machine
consisting of the cylinder spaces for the syrup and the gas cylinders; a dry store used
for storing the items such as cup, glasses, coffee syrup, and sauces, etc.; and the
locker rooms for the employees. The raw materials are replenished every three days
from its distribution center in Noida after rigorous quality checks. At every outlet, an
inventory stock of three plus one day buffer stock is maintained to meet all
exigencies.
The Floor Level: the company has designed its kitchen like a shop floor of a factory
where the different products made on different lines and one operation is conducted at
one place. At the floor level, separate lines are followed for vegetarian and non-
vegetarian food products to the extent that separate equipment's are placed at separate
locations to avoid any contact between the two products.
33
International Business Management
People working on the two lines are identified by the different colored aprons they
wear, like green apron for vegetarian products and black apron for non-vegetarian
products.
Every work in the kitchen is according to the clockwork and the time machine tells
when to keep the burgers on the pan and when to pick them up. These and many more
procedures are well laid down in a kitchen code book and followed at the outlets with
same belief. No wonder that the burgers in every outlet of the McDonald's taste the
same. The employees’ trash a burger not sold in ten minutes. Bin level charts are
made for every day of the month, which is based on the actual sales on the same day
of the same week in the previous month. The expected customers to arrive at the
outlet are divided into hourly time slots starting from 1000 hours to 2300 hours and
depending on the volume of the customers, the burgers are made. Also the volume of
the customers are divided into six categories:
Low: 0 - 30 persons
Medium: 30 - 60 persons
High: 60 - 90 persons
Ultra : 90 - 120 persons
Ultra 1: 120 - 150 persons
Ultra 2 : 150 - 180 persons
Almost 95 percent raw materials are sourced from around the country. Since some
products have very short life like peas loose half their sweetness in 24 hours after
harvesting, so to maintain the same taste and freshness, the products are frozen
34
International Business Management
straightaway. The company uses cold trucks for transporting the raw materials to the
distribution center in Noida, where they are stocked until distributed to the whole of
North India wherever the outlets are after a rigorous quality checks to ensure the
quality of the raw materials. Other than this every outlet has three sub divisions
training, ordering, and scheduling, which takes care of the various needs of the
production volume, capacity and the sales target at each outlet.
USE OF SUB-STRATEGIES AT McDonald's
1. Technology Strategy: McDonald's on the technology front has been a forerunner.
The equipments used by the company at its outlets are latest state of the art and
specifically designed for the perfect use. Take the example of ketchup dispensers;
these are designed to fill the plate adequately in just one stroke downwards. Other
than this the filling of the cheese and other ingredients is done by especially
designed dispensers so that each time the layering on the burger spreads the same
amount as has been calibrated.
There are set procedures laid down in a code book of the McDonald's, the booklet
contains the details of how to prepare the food products, to the methods of quality
checks, to the manner in which the employees are supposed to behave in front of
the customer, and various other such procedures.
The people at McDonald's go through a rigorous training schedule before they are
inducted in the company as crewmembers. The trainees are taught how to prepare
food products, to the general kitchen manners and also service delivery
techniques.
35
International Business Management
Use of Electronic Data Interchange (EDI) to link to the distribution center,
inventory management systems, and various other production and sales
forecasting techniques are just some of the things the outlets use to serve the
customers better.
2. Capacity Strategy: Since McDonald's is into the business of fast food restaurants
located in the market places and expects to cater to the customer's orders in flat
60-90secs. The capacity planning of each outlet should be designed in such a way
to cater to the crowds coming in the outlet. Each of the outlets has to be
independent on its own for serving the customers coming in, and hence the
production capacity should be large enough to meet all the situations.