McDonalds Strategy in India - Research Paper Example

 In his book the Macdonaldization of Society, George Ritzer equates the spread of the fast food chain Macdonalds all over the world to the rationalization process described by Max Weber in his analysis of modern society. Ritzer states that “Macdonaldization....is the process by which the principles of the fast food restaurant are coming to dominate more and more sectors of American society as well as the rest of the world.” (Ritzer, 1993:1). This report examines the strategy of the American fast food company, MacDonalds in India, which first set up its outlets in Mumbai and Delhi in 1996. Section 1: 1.1A: SWOT Analysis: Strengths: A logo (golden arches) that is recognized all over the world Global company with restaurants in various different countries, thereby allowing them to weather economic problems in specific countries Variation of their food offering to suit cultural differences, for instance offering the Maharaja Mac (with chicken) and veggie burgers (CNN, 2002) Worldwide restaurants owned and operated by franchisees Efficient, assembly line type of food preparation and serving process Inspection checks are carried out regularly to ensure food safety Weaknesses: Most of their products are beef and pork based Large amounts of money spent on training due to high employee turnover Mcdonalds foods perceived as contributing to modern trend towards obesity Opportunities: Can branch out into other food types such as healthy hamburgers, more salad and healthy foods Could upgrade its restaurants to attract more upscale customers Could provide specialized items such as sugar free and gluten free items of food Threats: Major competition from other fast food retailers such as Wendys and Burger King that provide more healthy food Unfavourable publicity for its food offers which are less healthy and more fatty 1.1B: PEST Analysis: Political factors: India’s government is secular and favours its current liberalization policies that promote foreign direct investment Economic factors: despite the world recession, India’s economy still shows a healthy growth rate Social factors: Religious and cultural aspects mean that people favour vegetarian diets and do not eat beef or pork Technology factors: India has one of the largest shares of people skilled in the use of technology tools and is fast emerging as the outsourcing venue of choice for software based technology projects. 1.1C: Porter’s Five Forces: 1.2: Macdonalds competitive environment in India: The primary attraction that Macdonalds has is that it offers fast foods and it has bene around in Indian cities since 1996, and branched out into home delivery of meals in Mumbai in 2004, to compete with food chains such as Dominos and Pizza Hut. It has several competitors in the Indian market. 1.2A: The primary global competitors for Macdonalds in India are Kentucky Fried Chicken, Pizza hut, Dominos, Subway and Burger King. The latter is however experiencing some problems as it attempts to introduce a beef-less menu as early as possible (YGOY, 2008). While Macdonalds is the most popular foreign food chain, it is however facing significant competition from local fast foods which are available through local outlets such as Saravana Bhavan, Papa John’s and Nirulas, which have been around for years and offer food that is priced more appealingly for price conscious Indian customers. These local food chains have already established themselves firmly in the lower and middle class Indian consumer markets in the cities. 1.2B: The right price: An essential part of Macdonalds strategy has been the offering of lower prices for the Indian customers. In general most food chains have to achieve the tough balance between hiking prices vis a vis the pressures of maintaining the necessary profit margins. Macdonalds has sought to keep its prices down through bulk buying, long term vendor contracts and achieving manufacturing efficiencies (www.casestudyinc.com). In terms of prices, Macdonalds offers the following range of prices: i.e., its Fillet-O-Fish burger at Rs.50, its soft Serve Cone at Rs.15, its happy price menu at Rs 20 McChicken at Rs.30 and value meals – starting from Rs. 89. As opposed to these prices, icecream scoops at Nirulas are Rs 50 to 75, with three scoops being priced at Rs. 100. Their milkshakes are priced at around Rs. 70 to 80. It serves its spicy burgers in a range of prices from Rs. 25 to spicy chicken at Rs 80 (www.foodiebay.com). The advantage this chain has is that it also offers typical Indian thali meals and spicy versions of burgers to suit the local palates. Price wise Macdonalds is still perceived as being somewhat expensive compared to other local brands but this is slowly changing through the offer of products such as the happy meal at Rs. 20 and the chicken burger at Rs. 30. 1.3: McDonalds Strategy: McDonalds has focused upon changing initial customer perceptions of the middle class in India that the food was different, foreign and the fact that they were not quite comfortable with it. It has promoted its brand as being Indian and promoting family values and culture, while also offering value for money through its prices (Chaturvedi, No date). It has streamlined its supply chain and sources most of its products straight form Indian farms (www.caststudyinc.com). 1.3a: Locations: McDonalds had already built itself up to 170 quick service restaurants in India by October 2009. It has two major branches, one focused on restaurants in the north eastern region of the country and the other segment comprising restaurants located in the southern and western regions. It initially opened outlets in Mumbai and Delhi, but now it has branches in most of the major cities of India, including those of tourist interest such as Jaipur, Mathura, Simla Pune, satellite Delhi towns such as Noida and Gurgaon, as well as other cities like Ahmedabad, Chandigarh and Bangalore (Dash, 2005). 1.3b: fast and facility service: The Company prides itself on fast, friendly service and offers a one minute service guarantee from the time the order has been placed to the time it is delivered. This has enhanced its reputation for fast service. It is also attempting to move into the home delivery and web based delivery sectors to capture that share of the market. 1.3c: reliance on Indian culture and religion: Mcdonalds has actively promoted itself as an Indian brand, with Indian franchisees and food items sourced from local Indian farms, as well as 100% Indian management. It caters to cultural sensitivities by not offering beef or pork products and offering plenty of vegetarian fare. It targets its advertising at families and young children in particular and offers in store, fun events for mothers and children to promote its family culture (Chaturvedi, no date). 1.3D; McDonalds targets: The Company’s strategy is targeted at achieving extra sales by pricing its items at less cost and setting the right price. One example of this is its Happy meal campaign, which offers a food product for the sum of Rs. 20 and is targeted at the younger section of the population. This has pulled in large sections of the younger populations and customers from the socio-economic class B (Chaturvedi, no date). It therefore achieves the three targets: (a) greater volume of sales by pulling in more customers (b) less cost, because the item in question is a potato patty and (c) the right price, i.e, Rs. 20, cleverly illustrated through its advertisement whose punchline is: These are the prices from back in our day. 1.3e: Indian expansion plan: Macdonalds has an expansion plan slated for 2010, with the plan to open 40 additional outlets in India, of which 10 will be located in south India. These outlets will provide the same fast and friendly service characteristic of existing Macdonalds outlets(www.casestudyinc.com). The advertisement catch phrase for the campaign is Har chotti khushi ka celebration, which in essence offers a Macdonalds product as the ultimate way to celebrate any little pleasurable event. The promotional strategy will incorporate a sensitivity to Indian religion and culture by offering beef and pork free products and catering to vegetarian tastes. The four elements of the expansion plan are shown in the figure below: INDIAN EXPANSION PLAN 1.4: Information Systems strategy: As Chaturvedi (no date) has pointed out, Macdonalds initially started its promotional plans by focusing on developing perception of its brand through new store opening and public relations work about how its brand was Indian. It was only later that the company ventured into mass mediums of advertising such as newspapers and television. Its current plans for 2010 however are much more ambitious, because with the growing popularity of the Internet in India and the increasingly techno savvy young Indian consumers, the Company is making use of web based tools in order to achieve its desired objectives. The company has an official India website which provides information about its products, its new initiatives and special deals. It has space for fun events and competitions, provides a FAQ section where consumers can find the answers to their most common queries, and it also provides information about employment opportunities and available franchises. 1.5: Information technology strategy: In addition to its promotional efforts through its website, Macdonalds is also seeking to make use of the tools of technology to further enhance its business and marketing prospects. It launched its home delivery of meals in 2004. Its new ambitious plans include the launch of a web based delivery service in India in about 75 cities in 2010; a concept which has already been successfully tested as a pilot project in Hyderabad. This model is based upon a delivery time limit of a maximum of ten minutes, where the driving time should not exceed seven minutes in order to ensure that the products are eaten on time.(www.casestudyinc.com) 1.6: Business Model: Web based Delivery Service Section 2: The Customer Activity Cycle: Macdonalds promotional campaigns have focused upon the prompt delivery of its products especially at its drive through outlets. This model is focused upon the efficiency in the product preparation process. The customer drives up to the delivery window and places the order; the person who takes the order repeats it to the employees working at the ovens; one flips the burger, the other heats the fries while a third puts the coke, straws, napkins and condiments together and bags the order. In this way, by the time the customer has driven around to the collection window after making the necessary payment for the order, his or her package is ready, neatly packed and prepared, ready to be served up with a cheerful smile. The procedure is similar at the delivery outlets located within the stores. The customer first of all makes his or her selection and the person taking the order also gathers information on the desired side orders such as fries, coleslaw or drinks. The operative relays the order to the employees responsible for the cooking and while they are packaging the products, the payments are collected and receipts provided to the customer. Any special requirements which the customers may have are also determined at the time of placing the order, so that acre can be taken to ensure that the order meets the customer’s specifications. In the event that the customer has placed a web based order that must be delivered within the specified maximum time limit of ten minutes, then arrangements are made to rapidly process the order in the same manner as preparing a drive through order, by adhering to the required time limits in each case, to ensure a smooth, fast and easy delivery that is well on time. Section 3: Macdonald’s core competencies: Macdonalds’ core competencies include the speed of its delivery service, because it has arranged its operations in such a way that its personnel are able to carry out their jobs at optimum efficiency. Other competencies include its adherence to its standards of quality, which it tries to ensure under all circumstances. Additionally, the company also fosters and encourages continual experimentation in order to sustain the quality and speed of its services and develop new products and new methods of working that could prove to be more efficient or corner it a larger share of the market (www.home.comcast.net). 3.2: Continuous innovation of products: In India, Macdonalds has been thriving mainly due to continuous innovation of its products. It offers a range of products that have been specifically tailored to meet the needs of the local population; for instance it offers products such as Maharaja Mac, McChicken and filet of fish, which have been developed specifically to suit the local cultural tastes. Hindu culture does not permit the eating of beef and pork; as a result offering products using chicken and lamb produce sales in larger numbers in India. Macdonalds also engages in continuous innovation of its products; continuous innovation is the process whereby a new product is introduced which has a limited effect on the existing consumption patterns. One such example of a Macdonalds product is the Macdonalds Snack Wrap, which essentially introduces different ingredients into a wrap each time and has some marketability so long as the novelty of the product lasts.(Hoyer and Mackinnis, p 417). Macdonalds has also been changing the normal range of its products which include beef burgers; it has spiced up its products which are targeted at the Indian markets, and also modified the environment and ambience of its outlets in India to reflect a more Indian ethos. Its innovative approaches are not therefore restricted only to its products, it also encompasses changes in its working conditions, locations, presentations and marketing, which are modified to suit the local populace. These innovations are devised bearing in mind the target population and the environment where the Macdonalds outlets are being opened. 3.3: Studying of Communities: Macdonalds operates as a franchise, allowing franchisees all over the world a considerable amount of freedom and creativity provided they adhere to some of the basic, uniform principles such as the logo, menus, design layouts and administration systems. In commencing its operations in any country, the Company tries to study the existing communities and tailor its plans to suit the needs of the local population. In its marketing strategy in the country, the Company has cleverly targeted its advertisements in such a manner that it provides the impression that the Company itself is Indian and the subjects of its marketing plans are generally families and young people, so that there is a family oriented ethos in the company’s marketing strategy. 3.4: Fast Service: One of the significant aspects about the Company’s brand is the prompt delivery of its services. In competing with other fast food enterprises, the Company benefits because it has a definite policy on timely deliveries. In its restaurants, it ensures that service is provided within a time period of three minutes, while products arranged to be picked up on a delivery basis are allowed a maximum time period of ten minutes. In order to adhere to the time specifications, the driving time is also not allowed to exceed seven minutes, to make sure that the products are delivered and ready to be eaten within the specified time period of ten minutes. If this time period is exceeded, it makes the products unfit to eat. 3.5: Training of skills and staff: One of the characteristics of Macdonalds franchisees is that they are required to undergo an intensive training program, which has to last for about nine months. Every employee needs to undergo this essential training and it commences with wearing the staff uniform and working in the restaurant, learning everything from preparing and cooking food to serving the customers and cleaning the premises(www.macdonalds.co.uk). This is followed by a training period at the regional centers where employees are trained in such areas as business management, leadership skills, team building and handling of customer enquiries. The employees are also taught about ordering, stock control, profit and loss accounts and the legal implications associated with hiring and employing staff members. The training does not stop there however, the franchisees are continually provided with continuous support from accounting, IT business controls and human resources. The franchisees also have access to a global marketing policy that is followed in order to ensure that there is some uniformity in the provisions of services by the Company throughout all of its global locations. Macdonalds Business Model: TRAINING for 1. Quality 2. Service 3. Cleanliness 4. Value TO ACHIEVE Recommendations: On the basis of the above, it may be noted that Macdonalds existing strategy in India has been quite beneficial in terms of making it the most popular international fast food chain in the country. It has modified its range of products to suit the local populace and has thus achieved quite a high level of success. With more and more companies entering the market in India and with the existing competition from local fast food outlets which are able to offer their products at much lower prices, it is important for Macdonalds to revamp its existing policies and price its products more competitively. The Indian consumer is price sensitive and this is often the most important criterion. Macdonalds has made a start with its products such as Happy Meal, but this needs to be supplemented with more such products. Macdonalds has also been associated with some scandals about its products, because they are believed to be high cholesterol products which cause heart and liver disease. This reputation also needs to be addressed, and unless Macdonalds is able to offset such adverse publicity, it may impact negatively on its marketing strategy in the long term. Moreover, there are also other opportunities which the company can address, such as developing healthy products and offering food items such as sugar free or gluten free products. References: CNN News, 2002. “The Maharaja Mac: fast food Indian style”, retrieved August 18, 2010 from: http://archives.cnn.com/2002/WORLD/asiapcf/south/07/14/india.spicy.fast.food/index.html Chaturvedi, Preeti, No Date. “How McDonalds evolved its marketing in India”, retrieved August 18, 2010 from: http://ipm.ge/article/How%20McDonald's%20evolved%20its%20marketing%20in%20India_ENG.pdf Dash, Kishore, 2005. “McDonalds in India”, Retrieved August 18, 2010 from: http://www.scribd.com/doc/22276744/McDonalds-India Franchising at Macdonalds. Retrieved August 18, 2010 from: http://www.mcdonalds.co.uk/static/pdf/aboutus/education/mcd_franchising.pdf Hoyer, Wayne D and Macinnis, Deborah G, 2008. “Consumer behaviour”, CENGAGE Learning. MacDonalds Business strategy in India. Retrieved August 18, 2010 from: http://www.casestudyinc.com/case-study-mcdonalds-india-business-strategy Macdonalds Case Study. Retrieved August 18, 2010 from: http://home.comcast.net/~nelson1397/mcdonaldscase.htm Nirulas. Retrieved August 18, 2010 from: http://www.foodiebay.com/ncr/restaurants/south-delhi/aurobindo-marg/nirulas-232 Ritzer, George, 1993. “The Macdonaldization of Society”, Pine Forge Press YGOY, 2008. “International fast food chains in India”, Retrieved August 18, 2010 from: http://in.ygoy.com/2008/05/06/international-fast-food-chains-in-india/ Read More