Evolution of McDonalds on the Indian Market - Essay Example

? MCDONALD’S IN INDIA Evolution of McDonald’s: Growth in the Indian Market Introduction Through TV advertisements, viral campaigns, print media and in-store promotions, the marketing campaigns of McDonald’s in its Indian market aims at promoting its products and services within this unique market. The company which entered the Indian market in 1996 has since evolved within the market with its products and services demonstrating an increasing market share. Nonetheless the company is subject to political, economic, social and technological forces within the Indian business environment which shapes the direction of its growth. However, the real problem which the company is facing in India is the dilemma of implementing the international food standards and at the same time meeting the unique tastes and preferences of the Indians. The success of the company in the market can be evaluated using Porter’s Five Forces. Therefore the competitive forces within the market, the power of suppliers and buyers and the threat of new entrants and substitutes are the forces against which the evolution of McDonald’s in the Indian market can be analyzed. PEST Analysis Political Factors McDonald’s international expansion faced political challenges because “not everyone in the world was happy to welcome McDonald’s into their country” (Center for Management Research, 2011). However, India has been described as one of the world’s largest democracies, a factor which is attributed to the liberalization of business activities within the country. Because of this liberalization McDonald’s was allowed to enter the Indian market for its food products. Regardless of this liberalization, foreign investors are only allowed to operate in India through partnership and as a result, the company has ventured into partnerships with local investors such as Hardcastle Restaurants Private Limited which provide food products to the Indian market. Moreover, the Indian government is fairly stable which has provided a secure business environment for McDonald’s business operations. Because of the political stability within India, the company has invested in various parts of the country through opening many outlets which are aimed at serving the market with sufficiency. The marketing strategy of the company includes various promotional campaigns through sports activities. The fact that the government of India is involved in the purchase of large quantities of sportswear demonstrates that the political environment favors the marketing strategy of the company. Economic Factors India is experiencing positive economic growth and thus leading to an increase in the ability of the population to spend money. This has elevated the sales revenue of McDonald’s within the Indian market. The economic climate in India is characterized with Multinational Companies (MNC) restrictions such as the support of companies which promote technological growth as opposed to food companies such as McDonalds and thus causing an economic hindrance of the company’s operations within the country. The economic forces within the Indian market are largely controlled by the market which defines the entry and exit of foreign companies to the market. However there in an increased support for employment within India which has enabled McDonald’s to acquire skilled labor within its business outlets. Social Factors In India, McDonald has been viewed as a “symbol of American economic and cultural domination” (Center for Management Research, 2011). This illustrates that the social environment in India has been a challenge to McDonald’s operations. The major social challenge in India is the fact that cows are being worshipped and thus the company is unable to provide the market with its beef products. It is however argued that the vegetarian diet among Indians did not prevent McDonald’s from success in the Indian market. Since, religion is attributed to the vegetarian diet in India; the company provides this diet for the consumers as a result of its respect for the culture of the consumers. It is further argued that it is the unique tastes and preferences within the Indian market which have shaped the brands of the company because it aims at satisfying the market through differentiated products for the various segments of the market. Technological Environment The lifestyle indicators in India indicate that the internet use within this society has grown significantly with 46, 004.50 internet users in 2007 which grew up to 91, 427 users in 2011 (Center for Management Research, 2011). Comparatively however, the investment in technology is relatively low in India which has led to inability of McDonald’s to adequately utilize online marketing strategy to promote its products within the Indian market. Another technological challenge which the company has experienced in its Indian operation is insufficiency of infrastructure to support the application of technology especially in outlets which are located outside major cities. Regardless of the challenging technological environment, the company has invested on information systems which enhance communication and management of its business activities. It is through the application of technology that the company’s operations in India have been linked to the other business operations in the world. Porter’s Five Forces The Power of Buyers The power of buyers in the Indian market is demonstrated by the consumer expenditure on food which grew rapidly from $21, 662.6 in 2007 to $253, 938. 43 2011 as demonstrated by the Center for Management Research (2011). The power of buyers is the strongest force in the Indian market owing to the uniqueness of the people in relation to culture and religion. The Indians are very specific about diet and they determine the success of the company in various markets. The concentration of buyers of the company’s food products is within the urban centers which reveal the reason why most of the company’s outlets are located in the country’s cities and towns. However, the company has attained an increased volume of buyers through it marketing strategies and provision of specialized diets to the market. The Power of Suppliers The power of suppliers to bargain for better deals is one of the forces which affect the operations of McDonald’s in the Indian market. The input that the company puts into the suppliers is increased by their differentiation into various food products. On the other hand it is arguable that the competition among suppliers has helped the company to be guaranteed of constant supply of food products. Threat of New Entrants Because of the “ prevalent rent control laws, clearance required from multiple authorities and the unwillingness of housing societies to enter into long-term leases”, McDonald’s if faced with a challenge of overcoming the new entrants into the market (Center for Management Research, 2011). This is due to the fact that the economic regulations are less strict on local investors who would enter the food market. New entrants are potential threats to the market share which the company is enjoying at the moment in the Indian market. It is however argued that McDonald’s has been able to overcome this challenge by providing diets which are culturally fit in the market. Threat of Substitutes Even through McDonald’s has practiced cultural sensitivity in its food products and services; it is arguable that new entrants into the company’s food production line are possible threats to the success of the company in the Indian market. It is necessary to note that new entrants could emanate from local or international investors. In this regard, it is recommended for the company to engage in more differentiation of its products so that substitutes to its line of production can be mitigated and overcome. Competitive Forces It is notable that the competitive forces in the Indian market are among the barriers of McDonald’s entry into the market. Moreover, barriers such as religious aspects of food such as beef has promoted local food producers and thus proving as a threat to the McDonald’s business. The competitiveness of McDonald’s in the Indian market has been hampered by the pressure groups such as anti westerners and health activists. To counter these threats, the company has also engaged in the differentiation of its products with a view of satisfying the different needs of the consumers and the varying tastes and preferences. Conclusion The analysis of McDonald’s Indian operations within the political, economic, social and technological factors reveals that the success of the company is challenged by external factors which lead to a recommendation for implementation of an effective business strategy for the market. Porter’s five forces further reveal that McDonald’s operations in the Indian market requires that effective marketing and production of more differentiated products must be achieved by the company so that it would overcome the threats within the market and the competitive business environment. The Indian Culture and McDonald’s Marketing Mix Introduction The strategies of marketing communication which McDonald’s employs in its Indian business are highly affected by the local culture. This is because majority of Indians view international food businesses as a demonstration of western influence into the country’s culture. Since, the majority of Indians are vegetarians and religious believers of a cow as sacred; the marketing communication for the company’s products is customized to fit the beliefs and culture of the consumers. This section of the paper gives a thorough discussion and illustration of the culture of Indian consumers and its influence on the marketing mix of McDonald’s. The people, price, place, product, promotion, processes and physical evidence are discussed as the seven Ps which have affected the marketing communication of the company within India. Price McDonald’s “kept its product prices low in India as the market was price sensitive” as revealed by the Center for Management Research (2011). Lowered prices are an effective marketing strategy. However, it is arguable that the company must ensure that the prices of its goods meet the production cost and the target profit margin. Price as a marketing mix variable has been taken into due consideration by McDonald’s operations in India. The affordable prices which the company provides for its food products and services are one of the company’s marketing strategies. This strategy is motivated by the fact that the Indian society is very sensitive about the cost of food and related services. Moreover, there is increasing competition in the Indian market with various food retailers providing competitive prices for the services and products that they offer to their customers. Product McDonald’s products comprise of one of the variables within its marketing mix. In its promotional activities, the company presents its products as culturally compliant and acceptable. As a result the attention of the consumers is attracted to the food products which eventually cause them to have an interest of purchasing. Additionally, the marketing images and messages are designed to present the company’s food products as the most authentic nutrients for healthy living. This is due to the increased awareness of Indians for health and fitness. Through the promotional campaigns and advertising on various media, the company has attained success in communicating to the market and informing them about the existence of the company’s products in the local market. Furthermore, McDonald’s aims at illustrating to the consumers the cost effectiveness of its products as compared to its business rivals. The differentiated products and special diet which McDonald’s provides for its Indian market are also communicated to the consumers to make them aware of the availability of these products and their cultural compliance. Place The Indian culture determines the behavior of consumers in purchasing various products. As a result, McDonald’s markets its products with a view of informing the consumers of the place where they would purchase and consumer these products. In this regard, the company informs the consumers of the various restaurants where they would dine or purchase the company’s food products. Nonetheless, the Indian culture is characterized by preference for eating at home as opposed to dining in restraints. In this regard that the company endeavors to inform the consumers and potential customers of the retail shops such as supermarkets where they would place an order or purchase various food products as produced and packaged by the company. Through effective marketing communication strategies, McDonald’s has achieved success in informing consumers where they can get special diets such as vegetarian food because majority of the Indians practice a vegetarian diet. Therefore, place as a variable within the marketing mix is an effective informative tool which has enabled the company to increase its market share. Promotion The promotion of McDonald’s products in the Indian market is achieved through “TV commercials, print, in-store promotions, and a viral campaign” as demonstrated by the Center for Management Research (2011). In this regard, it is arguable that promotion is an important aspect of marketing because it defines the ways in which a company communicates to the consumers and potential buyers. To conform to the culture of the Indians, McDonald’s promotes its products through advertising messages in Hindu so that understanding is enhanced. The popularity of television and an increasing television watching culture of the Indian people has caused the company to make use of television advertisements as the most popular form of product promotion. The price sensitivity within the Indian market has prompted the company to include messages which illustrate that the company provides its food in with affordability and quality. The Indian society is stratified into classes and thus promotional messages are targeted at particular classes. For example, the promotion of food products via television and newspapers commonly targets the upper class while posters, radio and flyers target the middle and lower class. People In McDonald’s marketing strategy, the people who promote the various products within the market are highly valued. In India, the company endeavors to recruit and retain talented and creative sales people and marketing communicators especially from the locals who adequately understand the culture of the people and thus able to communicate effectively. The tasks and responsibilities of the company’s promotional teams are given to the most talented marketers so that effectiveness of the marketing communication is achieved. The importance of people as one of the marketing mix variables is demonstrated by the company’s use of religious figures to put religious and cultural components in the advertising. The people as a marketing mix variable play the role of informing and creating desire among buyers on product which convinces then to make purchases and consume the products and services being promoted. Therefore it is through effective selection, recruitment and retaining of marketing people that the company has achieved significant success in attracting the attention of buyers into its products. Packaging McDonald’s food products are packaged in culturally friendly menus such as Veg Pizza McPuff, Veg Surprise and Chicken Grill. Good packaging serves as one of the effective ways of promoting the company’s food products because it attracts the buyers to the products. However, it is through packaging which illustrates the nutritious value of food products and the cultural compliance that the company has been able to attract more customers. Positioning When compared to food companies such as Baskin-Robbins, Subway and Nirula’s, McDonald’s has a better positioning in the Indian market which can be attributed t its success within this market. It can therefore be argued that market positioning is the most effective marketing approach of Macdonald’s within the Indian market. Conclusion The Indian culture plays a significant role in the marketing of food products and services by McDonald within the market. It is through effective consideration of the various variables in the marketing mix and the cultural impact of company success in marketing that McDonald’s has been able to achieve increasing success in the Indian market. Competitive prices, product packaging and marketing promotion have been effective tools in marketing the company’s products and services in the Indian market. Through various promotional media such as television, radio and newspapers, the company has attained success in informing the buyers on the place where they would obtain, purchase and consumes McDonald’s food. Moreover, the cultural compliance through vegetative diet has been communicated through the various marketing strategies employed by the company in the Indian market. McDonald India SWOT Analysis Introduction McDonald’s has demonstrated various strengths and weaknesses in the Indian food market which are important in the analysis and evaluation of its business success. The opportunities which are available to the company are also discussed in this section with a view of illustrating how the company would overcome the business threats and weaknesses. Strengths The major strength of McDonald’s is that the brand has had a worldwide fame and equity. This is due to the loyalty of the customers which the company has maintained through provision of quality food products and services to its customers. Additionally the company has provided variety of brands to meet the needs of the consumers within various markets. As a result, the company is one of the leading food businesses in the world. In the Indian market, McDonald’s has been able to achieve an increased share in the market through specialized diet which is congruent with the religious and cultural beliefs of the Indians. The internationalization of the company and its investment into various markets such as India has caused it to have a higher balance sheet position as compared to its business rivals. Weaknesses McDonald’s has however demonstrated weaknesses of a weakened development of its products in the Indian market and a slowed income and revenue from the Indian market as compared to its other outlets in the western markets. Moreover, the company’s franchisees in India are relatively disgruntled. Nonetheless, the company‘s biggest challenge has been the ability of meeting the needs of the Indian market for a special diet which is not comprised of beef products. Furthermore, the marketing strategies of the company have not adequately customized the marketing communication to fit the Indian culture and norms. Opportunities Regardless of the weaknesses which McDonald’s has portrayed in the Indian market, it is increasingly exposed to business opportunities in this market. The company has an opportunity of expanding its market within the country and thus serves a larger portion of the Indian population. With the growth of the economy, the dining out market in India is expanding which illustrates a business opportunity for the company. Additionally, the company has an opportunity of venturing into joint business with local retailers such as supermarkets which would increase market awareness of its food products. Application of technology in the company’s business activities in the Indian market is an opportunity of facilitating communication and interaction of the company’s stakeholders. Threats Local retailers in India are a business threat to McDonald’s operations because most of them are already established in the market in addition to being sufficiently aware of the cultural needs of the locals in relation to food products. There are also fluctuations of the exchange rates in India which pose a threat to the company’s capital investment within the country. However, the health consciousness within the Indian market has been described as the most significant threat to the business success of McDonald’s and other international food businesses within the country. Conclusion In the light of the above SWOT analysis, it is conclusive that the company should utilize its strengths and business opportunities within the Indian business market so that it would effectively overcome its challenges and weaknesses in business. McDonald’s Market Entry Strategies Introduction In its entry into the Indian market, McDonald’s employs wholly ownership of its subsidiaries in addition to the formation of strategic alliances. This section of the assay gives a discussion of the market entry strategies of McDonald’s into the Indian market with a view of presenting a comparative analysis with other approaches of market entry such as franchising and licensing. Formation of Strategic Alliances The entry into the Indian market by McDonald’s is achieved through alliances with local companies and retail businesses. In addition to the effectiveness of this strategy in international expansion, formation of alliances by foreign companies is a legal requirement in India. Therefore the company is adherent to the legal framework of the country. Through its subsidiaries in the Indian market, the company is enabled to have a share within the Indian food market. McDonald’s has applied the alliance strategy by having wholly owned Indian subsidiaries. Strategic alliance is a method of market entry which presents an advantage of international expansion by enabling a company to capture demand in a new market and thus overcome business rivalry. Through formation of alliances with Indian companies, McDonald’s has been able to build its sales volume within the Indian market significantly. Furthermore, alliances demonstrate an advantage of attaining a cost advantage by an investing company because the local supply of raw materials at a lower cost. On the other hand, formation of alliances is normally restricted to the government policies on various business operations especially on foreign investors. Therefore when the government policies change, the investing company is affected negatively. Moreover, there are pioneer costs which are related to formation of strategic alliances. Franchising as Compared to Strategic Alliances Franchising as a method of business entry in international expansion is more appropriate due to the fact that it reduces the costs related to investments. Therefore the risks associated with the establishment of a franchise are significantly reduced. Therefore franchising is more suitable for the international expansion of businesses as compared to alliances which is associated with high pioneer costs in initial capital investment to the company. These strategic alliances are associated with the risk of changes in government policies and the negative implication they can have on the business. However there is a lot of quality control and limitation in using resources of one country to benefit another country when companies franchise. This among the factors which justifies the application of strategic alliances by McDonald’s in its Indian expansion. Moreover, the fact that alliances with the company forms in India are wholly owned means that the company is at a position of enjoying the benefits of operating within an already established market in addition to the use of cheaper local labor and raw materials. Wholly owned Indian Subsidiaries Compared to Licensing Through the use of wholly owned Indian subsidiaries as a method of market entry, McDonald’s has significantly reduced the risk of losing the skilled and experienced labor force to business rivals. Moreover fully owned Indian subsidiaries enable the company to utilize the already established technology within the subsidiary. More importantly, the company is likely to have very tight control of the operations of its wholly owned Indian subsidiaries. On the other hand, this strategy has exposed the company to full risk in business operations because it takes total control of the subsidiary. Moreover, the company’s subsidiaries also cause an increased cost to the company which it has to bear in the marketing of products within the local market. Market entry strategies such as licensing prevent the risks and costs related to foreign investment in addition to overcoming various barriers and restrictions in the new market. However, Licensing has lack of control as a wholly owned foreign subsidiary. Conclusion It is therefore conclusive that the legal obligations that McDonald’s has to adhere to in the Indian market are the cause of the choice of alliances as a method of market entry. Additionally, the company has wholly owned subsidiaries in the Indian market which have enabled it to have total control of business operations. Market Adaptation and Standardization Introduction To adapt to the Indian market, McDonald’s has adopted various strategies and standards in production and provision of food services to its consumers. The standards and strategies of market adaptation are designed to meet the legal obligation, cultural compliance, hygiene and health. This section of the paper gives a critical analysis and discussion of the ways in which McDonald’s has been able to adapt and standardize its operations to fit into the cultural needs of the Indian market. Adaptation and Standardization in the Indian Market To adapt to the Indian market, McDonald’s has provided its food products and services in line with the cultural preferences and tastes of the Indians. This is demonstrated by the provision of the vegetative diet to the consumers which is aimed at satisfying the consumer tastes. Moreover, the company has adapted to the religious belief of the Indians by restricting its beef products. The provision of the special Indian diet and menu is a demonstration of the company’s standardization, adaptation and respect for the culture of the Indians. Moreover, the protein diet has been standardized into fish and chicken products and exclusion of beef products because the Indians worship cows. The adaptation of McDonald’s within the Indian market is demonstrated by the fact that it is provides food products with flavors and spices with fit the Indian taste. Vegetables have been standardized as the cooking medium for McDonald’s products in the Indian market and thus illustrating the high adaptation index of the company within the Indian market. The company has adapted to the Indian market through the adoption and implementation of Restaurant Management System (REM) to meet the need for efficiency and effectiveness in provision of services to the Indians. This is motivated by the fact that Indians consumes value efficiency in service delivery in addition to quality in food products. Moreover the careful nature of the Indian consumers has caused the restaurant crew to give some consumers kitchen tours to assure them and thus adaptability to consumer behavior. The standardization of McDonald’s products is congruent to the Indian government regulations and policies on international companies and provision of food products and services. Therefore regulations on food, hygiene and health have led to standardization of the company on matters of quality, ingredients and business operations. Nonetheless the standardization that the company has achieved in its products is benchmarked against international standards on food, hygiene and health. The standardization of the company’s procedures includes sanitation of trays and thorough cleanness standards. This is an effort of adapting to the Indian market and consumers who are conscious about health and hygiene. The high value and recognition for family and relationships by the Indian society has led McDonald’s to customize its services with a view of providing a family restaurant. There is also increased focus on children an adaptation methodology which also includes gifts for young family members. This has played a role of attracting many customers and attaining the loyalty of the company’s current consumers. Additionally, the company’s restaurants in the Indian market have been designed to have a casual look with well lit and casually comfortable environment. Furthermore, the employees of the company have been given customer relationship standards which ensures that they adhere to friendliness and cleanliness in provision of food products and services to the company’s consumers. More importantly, the company has standardized its pricing policy to enable it to provide the most competitive prices for its customers. This is a way of adapting to the Indian market which is sensitive on matters of price and cost of food products and services. Furthermore, McDonald’s uses community partnerships and adherence to its corporate social responsibility to enhance acceptance in the Indian market. Conclusion It is thus conclusive that the success of the company in the Indian market is attributed to its adaptability and provision of standards in the production, provision of food and the related services to the consumers. Appropriate marketing strategies are also core strategies of adapting to the Indian market by the company. Reference IBS Center for Management Research, 2011, “Marketing McDonald’s In India”, ICMR Read More