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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
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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:
Internationalize Business
Country Market Selection
Market Entry Selection
Global Marketing Decisions
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Internationalize Business
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
Country Market Selection
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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Market Entry Selection
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