International Marketing: McDonalds in India - Term Paper Example

?International Marketing: McDonald’s in India 0 Introduction McDonald’s is one of the leading Quick Service Restaurants (QSRs) in the world. The foodservice behemoth serves close to 69 million customers in 119 countries every day through its gigantic network of more than 34,000 restaurants. Founded in 1940, McDonald’s is based in Oak Brook, Illinois, United States. McDonald’s is not only a dominant player in the domestic market but in the International arena as well (McDonalds, 2013). The mission of the company is to become the customer’s ‘favorite place and way to eat’. McDonald’s has realigned its worldwide operations around its global strategy ‘Plan to Win.’ The retailer strives to continuously improve its business operations and thereby improve customer experience. McDonald’s realises that it exists because of its customers. It if for this reason that the foodservice chain’s aim is to provide quality, service, cleanliness and value (QSC&V) to every customer, every time. McDonald’s also ensures that it caters to the needs of all the stakeholders including the shareholders. McDonald’s, a publicly traded company, is a profitable business and provides superior returns to its owners. Its “three-legged stool” business model ensures that McDonald’s balances the interests of its operators, suppliers and employees. McDonald’s conducts its business in an ethical and responsible manner. The QSR also discharges its corporate social responsibility to make the world a better place to live in. The restaurant is well known for its hamburgers, cheeseburgers, chicken sandwiches, French fries, milkshakes, and desserts. In response to the changing times, McDonald’s has also included various salads, wraps, smoothies and fruit items in its menu. The Big Mac, Quarter Pounder and Chicken McNuggets are some of its immensely popular products. The company attempts to create a standardised set of items that taste the same across all its business locations. In some cases, the taste and ingredients are deliberately altered to suit local tastes. McDonald’s has adopted a multi-domestic strategy while pursuing its strategy of Internationalisation. 2.0 Rationale behind Internationalisation McDonald’s grew by leaps and bounds in the 1950s and 1960s in the United States. The company had thus made inroads in its home market and was looking at greener pastures oversees. The rationale behind internationalisation was to become a dominant worldwide player and increase its revenue. In 1967, McDonald’s opened its first oversees restaurants in Canada and Puerto Rico. As things stand today, McDoanld’s has business operations in 119 countries around the world (McDonald’s, 2013). The food chain has set three growth priorities; optimization of menu, modernisation of customer experience and increased accessibility to the brand. The last of these three growth priorities acts as a propeller for International expansion (DeTar, 2012). In 2012, the company added 1439 restaurants in its established markets like United States, France and Germany as well as its emerging markets like India, China and Russia. The ensuing discussion is on McDonald’s foray and expansion in India which is one of the most promising markets for McDonald’s. 3.0 Mode of Entry McDonald’s has been able to grow rapidly throughout the world due to its astute use of franchising. The importance of franchising in McDonald’s growth can be gauged from the fact that more than 80 percent of its restaurants are franchisees. McDonald’s has extremely standardised procedures which makes it easier to train franchisees. Standardisation in business operations enables McDoanld’s to provide the same product, the same taste all over the world. McDonald's set foot on Indian soil by forging a 50-50 joint venture partnership between McDonald's Corporation (United States) and two Indian companies; Hardcastle Restaurants Pvt. Ltd., and Connaught Plaza Restaurants Pvt. Ltd. It is noteworthy to mention that McDonald’s got a go-ahead from the Foreign Investment Promotion Board (FIPB) of India in 1991. However, the company opened its first restaurant in New Delhi in 1996. McDonald’s utilized this five year time period to feel the pulse of the market and put in place an infallible, robust infrastructure that would act as a solid backbone for the company for many years to come (Kulkarni & Lassar, 2009). Thereafter, the company adopted franchising as the mode of rapid expansion in the country. By franchising to local people, McDonald’s is able to acquire human resources who are familiar with the local culture and business. 4.0 Marketing Mix 4.1 Product McDonald’s has a vast array of foods and beverages to satiate the taste buds of its Indian consumers. The restaurant offers numerous burgers and wraps under its breakfast menu as well as regular menu. The Hash Browns, Veg. Pizza McPuff and French Fries are some of the chain’s extremely popular sides sold in India. The Indian restaurants of McDonald’s offer beverages like ice tea, cold coffee, black tea, fresh brew coffee and various carbonated drinks to their customers. The Indian customers can also enjoy desserts like McFlurry (Oreo and Choco Crunch), Flavor Twist (Green Apple, Orange and Raspberry) and various shakes at McDonald’s outlets (McDonald’s India, 2013). 4.2 Price Mc Donald’s offers products at a reasonable price to the value conscious Indian consumers. The food chain has devised various combo meals that provide more value to the consumers. For instance, the Econo Meal, which includes burger, small fries and small coke costs INR 79 only. Likewise there are Extra Value Meals on offer which includes a burger/wrap/McMuffin, medium fries and a beverage of customer’s choice. McDonald’s has specifically introduced the Happy Price Menu in the country which starts from as low as INR 25. Overall, McDonald’s pricing strategy in India has enabled it to increase sales volume by providing products at affordable prices (Bhushan, 2001). 4.3 Place McDonald’s set foot on Indian soil in 1996 and since then has made inroads in the country. The restaurant chain is now a well known brand throughout the country. McDonald’s pioneered the establishment of cold chains in India thus created a robust supply chain infrastructure (Dutta, 2005). The company sources its raw materials from numerous suppliers who satisfy the company’s stringent quality norms. In India, the McDonald’s brand is managed by its two joint venture partners. The Connaught Plaza Restaurants Private Limited manages the Northern and Eastern India while the Hardcastle Restaurants Private Limited is responsible for the business operations in Southern and Western India. McDonald’s has 174 restaurants across the Southern and Western region. These restaurants collectively serve close to 165 million customers annually. If the restaurants of the Northern and Eastern region are also considered, the tally of McDonald’s outlet in the country is more than 310. These outlets are located at convenient places like shopping centers, malls, airports and leisure centers. In addition to the brick-and-mortar stores, the retail chain has started the concept of McDelivery wherein the fast food chain delivers the order to the customer’s doorsteps. The service is available in select cities in India. The customers can place their order for delivery by calling 66000666 or by logging in at http://mcdelivery.co.in/ (McDonalds India, 2013). 4.4 Promotion McDonald’s uses various tools of the promotion including advertising, sales promotion and public relations. The company advertises extensively in the print and the electronic media. In general, the restaurant uses the electronic media to reach the masses in the country. The advertisements use ‘emotional appeal’ to woo the Indians. The company recognises the power of social media and utilizes it to gain maximum possible advantage. A lot of promotional activity for the foodservice chain focuses on outlet design, new store openings and importantly public relations. McDonald’s also ran certain in-store events for mothers and children so as to break the ice and familiarise the customers with the brand. In order to project itself as a responsible corporate citizen, McDonald’s sponsors numerous interschool competitions and garnered funds for charity on World Children's Day. The restaurant specifically supports educational programs for the girl-child. The fast food giant also assists local health organizations in the Pulse-Polio program. The foodservice chain also runs various promotional offers for its customers from time to time. For instance, in the month of October, McDonald’s offered a ‘Smile Card’ on the purchase of any food item. This Smile Card could be redeemed at any McDonald’s outlet and the customer could pick up certain free items (McDonalds India, 2013). 5.0 Brand Positioning and Advertising Strategy In India, McDonald’s is positioned as a family restaurant. Moreover, the restaurant chain strives to attract kids specifically. This brand positioning has been instrumental in fueling the success of the restaurant in the country. The ambience and decor of the outlets is such that it attracts children. The presence of the statue of Ronald McDonald’s adds to the excitement. The color scheme of red and yellow add liveliness and enthusiasm in the outlet. The menu options of McDonald’s are diverse and cater to all members of the family, irrespective of age. The French Fries and Happy Meals are a rage amongst the kids. The restaurant also organises birthday parties for kids wherein it offers part of the McDonald’s premises for 90 minutes. The kids enjoy the lively decoration and the games organised by the restaurant. The gift given by McDonald’s to the birthday child is obviously an added attraction. In a bid to woo a larger proportion of adult population, the U.S. based giant has started incorporating some changes in its color scheme in recent times. The red and yellow logo is giving way to a white logo and the interiors of outlets are being done up with relatively pale colors now (Bhushan, 2012). 5.1 Advertising Strategy Appropriate advertising has been instrumental behind McDonald’s success in India. The food chain made deliberate efforts to ensure that its advertising does not position it as a ‘teenager’s hangout.’ Through a series of advertisements, McDonald’s was portrayed as a restaurant where families with kids and youngsters had a good time. Many of the outlets were named as ‘McDonald’s Family Restaurant’ to reinforce the positioning of the restaurant. The initial advertisements which carried the tag line ‘McDonald's mein hain kuch baat’(There is something about McDonald’s) aimed to induce trials and coax customers to visit the restaurant. Thereafter, the need of the hour was to make visits at McDonald’s a regular experience. The new advertising campaign carried the tag line ‘Toh aaj McDonald's ho jaye’ (Let us go to McDonald’s today). It is pertinent to mention that the storyline in all advertising campaigns depicted a happy family which was in line with the overall positioning strategy (Kulkarni & Lassar, 2009). 6.0 Marketing Strategies In its home market, United States, McDonald’s derived majority of its revenue from Drive Thru stores. However the same model could not be replicated in India given the high cost of real estate and poorly developed infrastructure. The marketing strategy aimed to create the ‘pull factor’ and coax the target market to come and enjoy at the McDonald’s restaurant. The foodservice chain also initiated the McDelivery service to reach people who could not visit the outlet but wanted to enjoy McDonald’s food items. The overall marketing strategy was aimed at removing the perception that McDonald’s was an American brand and only meant for the people in the Western parts of the world. A lot of effort was made to ‘Indianise’ the brand. 7.0 Social and Cultural Factors A company has to take into consideration the social and cultural factors of a country before devising its marketing strategy. Social factors such as social classes, status of women in the society and family structure impact purchase decisions. In countries where strong trade unions exist, companies may refrain from employing local workers. Many aspects like language, religion, values and attitudes, education, aesthetics, law and politics, and social organization determine the culture. The language has to be considered while devising the communication strategy as well as at the time of deciding the brand name for a particular country. In culturally diverse countries people speak numerous languages and dialects which can be problematic for marketers. Religion is also an important determinant of consumer behavior. Consumption preferences and patterns, customs and attitudes toward material possessions depend on religious beliefs of people. Consumer behavior is also determined by instrumental values (ambition, intellect, logic etc) and terminal values (freedom, self-respect, wisdom etc). The importance of culture can be gauged from the fact that companies prefer to adopt joint-ventures as an international entry strategy wherein there is a large cultural variation between the home country and host country. 8.0 Factors Influencing Distribution Channels A company can opt for numerous distribution strategies like intensive distribution, exclusive distribution and selective distribution strategy. The exclusive distribution strategy is adopted when a brand is positioned as a premium product and caters to the elite. McDonald’s expansion strategy in India required an intensive distribution strategy. In line with this, McDonald’s pursued the price penetration strategy. The food chain acted prudently and adopted a selective distribution strategy initially. Thereafter it went in for an extensive distribution strategy through the franchising route. The setting up of the countrywide cold chain by McDonald’s played a key role in determining where the chain’s outlets would be located. Many factors like cost of real estate, state of infrastructure, government policies, played a key role in deciding McDonald’s distribution strategy. Moreover the distribution channels were devised keeping in mind where the target market was. As a distribution strategy, the company opened its stores in the metropolitan areas and Tier 1 cities initially. People living in these big towns were more open to foreign brands and therefore it was easier for McDonald’s to induce trails in this community. Thereafter, McDonald’s spread to smaller town to penetrate further in the country. The restaurant chain also tapped the travelers by opening up outlets on the highways. The completion of the Golden Quadrilateral Highway Project that connected the four geographic corners of India provided a boost to the company’s operations on the highways. McDonald’s has also opened several drive-through outlets especially on highways. The U.S. based chain has inked a pact with Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) to open restaurant within the fuel station premises. McDonald’s intends to go on an expansion spree in the country by pumping in 500 crores. The restaurant chain may also change tactics in the sense that instead of going in for leasing model, it may go for outright purchases (Goyal, 2011). 9.0 Conclusion Ever since its entry in India, McDonald’s has grown by leaps and bounds to become a household name in the country. The U.S. based fast food giant has positioned itself as a ‘family restaurant with a kid’s orientation’ in the country. The company has judiciously balanced all elements of its marketing mix to reinforce its market positioning. McDonald’s had to alter some of its menu items to cater to the different social and cultural aspects of the country. The restaurant chain has altered the themes of its advertisements from time to time. The advertisement campaign used during the introduction stage of the brand in the country was aimed at creating awareness while the advertisement campaign used during the growth stage was aimed at building preference for the McDonald’s brand. In conclusion, it can be said that McDonald’s has seized the opportunity of a growing and burgeoning middle class in India and has been able to make a mark in the country. References Bhushan, R. (2001). "India: McDonald's plays volume card again", Businessline, , pp. 1. DeTar, J.(2012). McDonald's Shares Rise Amid India Expansion Move, Los Angeles. Dutta, D. (2005). The perishable food chain In India - opportunities and issues - Management briefing: Case study: McDonald's - creating an ecosystem, Aroq Limited, Bromsgrove. Goyal, M. (2011). We will spend 500 crore on expansion: Amit Jatia, Vice-chairman, McDonald's India (South-West) Interviews], New Delhi. Kulkarni, S. & Lassar, W. (2009). McDonald's Ongoing Marketing Challenge: Social Perception in India, Florida International University, Department of Management and International Business, Miami. McDonalds. (2013). Available from: http://www.mcdonalds.com/us/en/home.html [Accessed: 18 December, 2013]. McDonalds India. (2013). [Online]. Available from: http://www.mcdonaldsindia.com/ [Accessed: 18 December, 2013]. Read More