fast food chain operation

McDonaldis one of the leading fast food chain operating in more than 120 countries (Exhibit – 4) with more than 30000 restaurants. McDonald opened its first restaurant in 1955 in Illinois and started to grow rapidly serving around 47 million customers daily with more than 1. 5 million employees. As far as Indian markets is concerned it was a distant dream for any western fast food chains to enter India and serve Indian customers, the reason being distinct dietary habits and food preferences of Indian consumers.

After 1990 when government of India came up with economic reforms that liberalized policies of foreign investments, established western fast food chains like KFC and PIZZA HUT rushed to the Indian market but McDonald spent about six years analysing the market before entering India. During the analysis phase McDonald first categorized its various Opportunities, threats, strengths & weaknesses in Indian market.

The analysis came up with the results like: increase in the purchasing power of individuals, their dietary habits like opposition to pork and beef and more inclination towards vegetarian foods, increase in urbanization and socio cultural habits. Depending on the results from the analysis McDonald came up with effective market mix (4Ps) that helped them to utilise the opportunities and thus eliminating the threats.

The major highlight of the strategies adopted by McDonald was: Indianizing the menu and thus eliminating beef and pork completely, wide variety of products with different prices, confining itself to urban cities and building strong brand equity through various CSR events. This case analysis basically gives the overview of different strategies adopted by McDonald to establish themselves in Indian market. STRUCTURE OF THE CASE ANALYSIS (1) Market Analysis External Environmental Internal Environmental Analysis Analysis

(Strengths & weaknesses) Micro Analysis Macro Analysis (Opportunities and Threats(PESTLE Analysis) for a new entrant in Indian Political food industry ) Economical Socio-cultural (2) Market Segmentation, Targeting and Positioning (3) Market Strategies (4P’s) (4) Outcomes MARKET ANALYSIS Market analysis done by McDonald’s during 1990’s included various aspects of Indian market and consumer. Looking at the data we can classify the analysis into external analysis and internal analysis. (1) EXTERNAL ANALYSIS

Further divided into macro analysis and micro analysis. (a) MACRO ANALYSIS: Macro analysis takes Political, Economical, Socio-cultural, Technical, Legal and Environmental issues in consideration, but as per given case study, we are taking only 3 issues Political, Economical and Socio-cultural. Political: Liberalisation of policies: Liberalisation of policies paved path for MNC’s to India. Change in polices regarding in-flow of foreign capital and technology; government fixed exchange-rate eased up the process for MNC’s. Economical: Growth in GDP:

The GDP growth until 1990’s was around 3% but after liberalisation the growth rate was around 6 to 7%, which shows increase in purchasing power of the individual. Socio-cultural: Acceptance of western culture: There was a significant change in the thinking of people towards western companies and western culture . The increase in use of internet is an example of this. Eat-out tradition began to grow very fast with increase in working parent families. McDonald’s internal analysis can be braked-down into strength, weakness, opportunities and threats.

(b) MICRO ANALYSIS: Opportunities: Increase in urban population from 21. 3% to 28. 1% (exhibit – 2) because of employment, education. Increase in eat-out culture and purchasing power of individual. 53% (Exhibit – 7) of a house hold income is spent on food and beverages. Threats: India has been a country of different cultures (5000 ethnic groups) each with its own food habits and cuisine. Even though the food preferences of Indians show that 80% are non-vegetarians only 17% of them were pork and beef eaters (Exhibit – 11).

McDonald has a image of pork and beef serving restaurant which is a threat for it in India. (2) INTERNAL ANALYSIS (ANALYSIS OF THE COMPANY) Strength: One of the strengths of McDonald’s is its vast knowledge and expertise in various countries which helped it gain expertise in making a strong and efficient supply chain. This will once again help it in building a efficient supply chain in India. It also has established and good brand equity around the world. Weakness: Opposition in people for MNC’s was decreasing but yet prevailing.

There was a need for McDonald’s to rebrand itself in Indian consumers. In order to develop an effective marketing strategy it was very important for McDonald to understand its target customers. It was necessary for them to first understand Indian market and its consumers to communicate itself to consumer market. Basically McDonalds segmented their product and services according to base of Demographic, Psychographic and Behavioural attributes. McDonald did the thorough research for six years and was able to do well because of keen understanding of the Indian economy.

MARKET SEGMENTATION & TARGETING Market segmentation is dividing of single market into smaller segments. Segmentation makes it simpler to address the needs of smaller groups of consumer. Three different bases of segmentation done by McDonald in India: 1. Demographic Segmentation: McDonalds uses demographic segmentation strategy with age as the parameter. The main target segments are children, youth and the young urban family. It offers different products like happy meal which includes a free toy for kids.

For families it has made different outlets and meals which are suitable for takeaways and drive-thru. It has also created a suitable environment for youngster to hang out with their friends and get their lunch. 2. Psychographic Segmentation: McDonald’s adopted themselves to the lifestyle of the Indian consumers. India has huge vegetarian population so McDonalds came up with an entirely different product for Indian customers like Mc Veggie burger and McAalootikki burger. As it is not considered religiously incorrect to eat beef in India, the menu has no beef dishes.

They also made McDonald a fun place where young urban families can spend some quality time, while their children can enjoy every moment of McDonalds. 3. Behavioral Segmentation: McDonald targeted mostly occasions like Birthdays and started attracted many families to celebrate their kids birthday. They made many advertisement effort aimed directly at kids and younger generation to promote birthday parties at McDonald. As most young people in the cities like Mumbai, Delhi and Bangalore live in small overcrowded flats McDonalds has become a convenient place for birthday celebration. POSITIONING

Positioning is an effort to influence consumer perception of a brand or product relative to the perception of competing brands or products. Its objective is to occupy a clear, unique, and advantageous position in the consumer’s mind. In India positioning of McDonalds has been directed as a Family restaurant. Then they started positioning according to the kids as well by introducing new advertising of toys with their products such as “Happy Meal”. Now youngster and adults havebecome so use to fast foods that McDonalds has also started to target them and try to position itself as a place for all.

This may be also due to the fact that India has second largest population in the world and they adopted this approach and tried to position themselves according to this approach to increase sales and revenue. McDonalds therefore wanted to position itself as ‘Indian’ and a promoter of ‘family values and culture’, as well as being ‘comfortable and easy’. Simultaneously, the brand wanted to communicate that it was committed to maintaining a quality service, cleanliness and offering value for money. MARKETING MIX (4P’s) Market Strategies Opted By Mc Donald in India

Coming on to Strategies, McDonald strictly followed the concept of 4Ps for extending their share in Indian fast food market. Looking upon all the aspects of 4Ps in details, following was the approach made by them to enter the market and successfully lead it since then. Product: Taking the food habits of Indians into consideration, Mc Donald Indianised 70% of their menu, which really helped them to successfully grab Indian population. Also keeping in mind the un-acceptance of beef and pork in India , they replaced it with mutton-based Maharaja Mac. The French fries served in India also did not contain beef tallow covering.

They excluded egg from ice-creams and mayonnaise served and also introduced Indian flavoured ice-creams. Pricing: Mc Donald came up with wide range of products in terms of pricing for serving both the lower-middle and high socio-class of society. (Products ranging from Rs. 7 to Rs. 128) They charged Rs. 74 less than what they charged in US in almost every product. Their menu was 80% visual and 20% descriptive. They used to attract customer initially by low prices, then increased their prices by simply giving another name to the product, for example- McAlootikki changed to Veg.

Surprise. Place: Mc Donald opened its first outlet in two of the most western culture exposed cities i. e. Delhi and Mumbai, then they targeted the national highways connecting these cities by collaborating with Bharat Petroleum Corporation Ltd. As a part of Quick Service Restaurant (QSR) business, McDonalds opened its outlets only within 500-Km radius of its main distribution centres. After that, they tapped into business of shopping mall, multiplexes, railways and bus stations. Promotion: They promoted their restaurant as “Third place” between work and home.

They also introduced “Music Meal” in association with Coca-Cola India and Universal Music India. They celebrated Children’s Day week, organised Pulse Polio and camps. Fun zones and Lego toys for children Looking upon the belief of Indians in Karma Mc Donald introduced “Itch Karo Rich Bano”, where the consumers were given lucky coupons complementary with their meal which they scratched to get gifts. This was a part of their promotional strategy which really worked well in India. Outcome It is reasonable to say that MCDonald’s has achieved a decent success in India.

McDonald’s with its strategies was able to increase its sales volume, which in turn got down the break even to five to seven years which is much favourable when compared with 12-13 years that it takes in foreign countries. It is also stated that McDonald’s achieved a decent success as it showed a 50% annual revenue growth since 1997. A survey by Synovate showed that 20% of young Indians between ages of 8 to 24 reported their preference for McDonald’s products, followed by Pizza Hut (11%) and then KFC(2%). Even after all these achievements it cannot be concluded that McDonald’s succeeded in India. McDonald’s growth in India remains uncertain.