PROJECT ON OPERATION MANAGEMENT

TOPIC

MC DONALDS OPERATION IN INDIA

INTRODUCTION

The McDonald’s Story - Genesis

The story of McDonald’s started in 1954, when its founder Raymond Kroc saw a hamburger

stand in San Bernardino, California and envisioned a nationwide fast food chain. Kroc proved

himself as a pioneer who revolutionized the American restaurant industry. Today McDonald’s

is the world’s largest fast food chain serving 47 million customers daily. McDonald’s is now

one of the most valuable brands globally, worth more than $25 billion. The Golden Arches

and its mascot Ronald McDonald have gained universal recognition. Though the company

has roots in the US, McDonald’s today has become an accepted citizen of the world.

Year Events

1955 Ray Kroc opens his first restaurant. McDonald’s Corporation is created

1957 Quality, Service, Cleanliness and Value (QSC & V) becomes company motto

1963 Ronald McDonald makes debut

1965 The company goes public

1968 Big Mac is introduced`

1974 Happy Meal is launched

1996 McDonald’s opens in India, the 95th country

HISTORYmc donalds bar-b- que opens

Dick and mc donald open mc donalds bar -b -que restraunt on fourteen and e street in san bernardino california

1n 1948 mc donald's founded dick and mc donalds shut down their restraunt for 3 months for

alteration , in december it reopens as a self service driver in restraunt

1955des plains location opens

kros opens his first mc donalds in des plainses, iilinoes on april 15, 1953 , first day sales are $ 366.12.

MC DONALD'S IN INDIA

McDonald’s in India

McDonald’s entered India in 1996. McDonald’s India has a joint venture with

Connaught

Plaza Restaurants and Hard Castle Restaurants. Connaught Plaza Restaurants

manages

operations in North India whereas Hard Castle Restaurants operates

restaurants in Western

India. Apart from opening outlets in the major metros, the company is now

expanding to Tier

2 cities like Pune and Jaipur

Challenges in Entering Indian Markets 1. Regiocentricism: Re-engineering the menu -

2. The vegetarian customer

Segmentation, Targeting and PositioningMcDonald’s uses demographic segmentation strategy with age as the parameter. The maintarget segments are children, youth and the young urban family.

% of kids who influence what FMCG brand their family buys

1. 71 % OF KIDS CONSUMER BISCUITS2. 59% OF KIDS PIZZA AND BURGER3. 52 % FRUITS

COMPANY USING THE CONCEPTS

Customer Perception and Customer Expectation

Customer perception is a key factor affecting a product’s success. Many

potentially

revolutionary products have failed simply because of their inability to build a

healthy

perception about themselves in the customers’ minds. McDonalds being an

internationally

renowned brand brings with it certain expectations for the customers.

Target Segment What is McDonald’s for me?

A Family with children A treat to children, a fun place to be for the children.

Urban customer on the move Great taste, quick service without affecting the work schedule

Teenager Hangout with friends, but keep it affordable

McDonaldizing the Suppliers

McDonaldizing the SuppliersMcDonald’s has changed the nature of not only the food service industry but also the foodprocessing industry as well. McDonald’s realized that the battle between fast food chainswould increasingly be one of efficiency of supply, lower cost production and greater desire toinnovate. It pioneered with innovative and sophisticated food distribution and packagingsystems when the traditional food processors were unwilling or unable to supply food itemsthat McDonald’s demanded. They achieved amazing consistency by devoting more attentionthan anyone else to field service and training at store level. Production was concentrated inhuge plants devoted exclusively to McDonald’s. McDonald’s also started with tiny suppliersand grew with them displaying great loyalty.

Nowhere is the supplier loyalty more evident than in development of new, improvedproducts. Some of McDonald’s classic food items like Filet-o-Fish, French Fries, ChickenNuggets etc. are results of supplier innovation. Interestingly, it took KFC more than three

years before in finally introduced its own version of chicken nuggets. Thus suppliertechnological expertise had given McDonald’s a product which was not a mere marketinginnovation but a technical one. McDonald’s attempted to squeeze labour out of the stores by

BUSINESS

McDonald's Finds Unique Way to Beef up its Presence in IndiaMcDonald's Corp. (NYSE:MCD) announced plans to invest $76.44 million (3 billion rupees) over the course of the next three to five years in efforts to triple its India operations.

The first phase of its plan is to ramp up its presence in cities and major airports in Delhi, Mumbai, Kolkata and Chennai. All totaled, McDonald's has 123 restaurants in India.

The elephant in the room here is obviously the cow, the animal that McDonald's built its empire on, but not a popular source of meat in India. To fight this, McDonald's fuses its India menu with local flavors – McCurry Pan, Pizza McPuff (basically a Hot Pocket), and India's Big Mac, the Chicken Maharaja Mac – a strategy shared by its other international restaurants. And this r

And this represents a major difference between expanding restaurant operations in India, versus China. One can say this is McDonald's way of striking first in India because, judging by the menus, the upper hand would go to Yum! Brands Inc. (YUM), owner of KFC, Pizza Hut and Taco Bell. In fact, it has been going toe-to-toe with Domino's in India for nearly a decade.It might seem easier for Yum! to carry its success over to India because it doesn't have to substitute its core products out of the menu. And its success in China could give the company some much-needed momentum. Yum's better-than-expected third quarter earnings were attributed to international growth. The same factors favor PepsiCo. Inc. (PEP), which reported a 17% gain in third-quarter net income.It's also worth mentioning that McDonald's India operation is a 50-50 joint venture partnership between McDonald's and two Indian businessmen. Amit Jatia's Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. Vikram Bakshi's Connaught Plaza Restaurants Pvt. Ltd owns and operates the Northern operations.

McDonald's might have an earlier start in the race to feed India's growth, but its successes (or failures) won't make as large as a mark on its overall earnings as a company fully vested in overseas growth.

That said, McDonald's is doing great earnings-wise. The company is expected to post big third-quarter earnings on Friday morning. Last week, as the company posted its September sales, it said that total sales were up 12% and predicted earnings-per-share of 89 cents, up from EPS of 68 cents in 2006

The company also announced last month that it plans to increase its already beefy dividend by 50%, and more may be on the way. Overall, the company's stock is up more than 34% in the past year.Ne

McDonald's size has three key advantages:  Uniform menu offerings can be mass produced, lowering production costs.

 Bargaining power with suppliers lowers input costs and boosts margins.

 Large advertising budget means lots of domestic and international exposure.

COMPETITORS

KFCOne of the major competitors for McDonald in the burger segment is KFC. It first came to India in 1995, where it was one of the first multinational food chains to have entered India. It proved not to be a very good time to have come to India where people were still not able to come to terms with multinationals coming to India, and it was targeted by many and remained a not so known food outlet, while the ones which came later became more popular. KFC India had to shut shop in the late 1990s after it faced heavy protests not only from anti-multinational groups but also animal rights protector, PETA.�But unlike McDonald, KFC has not been able to establish itself and shun its image of being a beef �burger shop. McDonalds is clearly poised well in terms of appeal to the majority of the Indian �population, 40% of which is vegetarian. While KFC has not been able to do that, and it is still seen as a chicken only restaurant.

McDonalds has a wider variety here with products starting from as low as Rs 20, while KFC has not �been able to match that. KFC is still priced a little higher for the general Indian population and its strong customer segment is the cosmopolitan population which is mall going and earning or have spare money to spend, 18-30 years. While people from even small income range and lower middle class have been able to associate themselves with McDonalds. McDonalds has set up its own supply chain investing � �huge amount which leads to lower costs and prices.

When it comes to chicken burgers McDonalds needs to provide more variety on its menu as it is �claimed that KFC is coming up with 15-20 new InIndianised products.

McDonalds has more than 140 restaurants in India and is adding at a fast pace, while KFC has �presence only in limited areas especially the southern part of the country.

KFC claims that even without much promotion it has the strongest brand recall for chicken products. KFC even sponsored a contest during a cricket match, and is a well known brand in the southern pFollowing is the marketing mix of KFC:ProductZinger is its flagship productFamous for its chicken � �recipe world overBrought high selling products from international marketsIndianized menu with products� � like tikka wrap n; roll, chana snacker, thali, succulent chickenVeggietables, one-of-a-kind kids meal � � �comes in several different laptop box designs featuring awesome puzzles and games.

The veg products are juicy from inside and crispy on outside which differentiates KFCDistinguished � �manufacturing for beg and non veg productsPlanning to add 15-20 new products to menuPriceLow � �priced to target the huge middle class as well as upper class population of indiaHas sub 50 snackbox, �and chana snacker at Rs. 25Offers Veg and non veg thali at Rs 50Twirl priced at Rs. 7PlaceThere are � � �around 40 restaurants in the countryStrong hold in Mubai, Hyderabad, BangalorePlanning to add 10 � �restaurants per year and reach 50 by 2008Targeting non veg eating states e.g. West Bengal, Punjab, �Andhra Pradesh, Tamilnadu besides the cities where it is already present.

Has switched to franchisee modelExpanding and opening stores in mallsPromotionHas started a TV � � �campaign, following which sales surged by 30%Promotion is centered around Finger Licking �GoodTargets mall going population i.e. youth in the age group 18-30Food courts are sporting the logo � �of KFCAlso sponsors cricket matches and related contestsLOCAL FOOD JOINTSAnother major �competitor for McDonald are the local food joints offering burgers. The local food joints include the

following:1.Joints which are limited to a city and have around 2 -3 outlets in a city. For instance Om �Sweets in Gurgaon will come in this category.�

FRANCHING ............

Franchise System is the Backbone of McDonald’s Success The backbone of McDonald’s success and most of other fast-food chains is its franchise. In other words, one of the many reasons that McDonald’s has been able to expand so quickly and achieve its reputation/brand recognition has been its effective franchising business model. Not only does the business model allow the company to expand quickly both domestically and internationally, the franchise system, having uniform operations, has made the McDonald’s restaurants one of the most standardized in the world. Not only do all McDonald’s seek to offer the same product offerings, they intend to offer the same food experience for all of its customers – no matter what part of the world you are in. Today, McDonalds franchise network is the world’s leading food service retailer, with more than 30,000 franchise restaurants serving 52 million people in more than 100 countries. Of those stores, more than 70 percent are owned by independent operator franchisees.