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Effectivity of marketing strategies adoped by mcdonalds in banalore city

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Effectivity of marketing strategies adoped by mcdonalds in banalore city

  1. 1. EFFECTIVITY OF MARKETING STRATEGIES ADOPTED BY MCDONALD’S IN BANGALORE CITY By SANSAR BIRMAN Enrolment No: 118263141 En A DISSERTATION Submitted to the INSTITUTE OF HOTEL MANAGEMENT, CATERING MANAGEMENT, TECHNOLOGY & APPLIED NUTRITION, BANGALORE In partial fulfilment of the requirement for the degree of Master of Science in Hospitality Administration 2011-2013
  2. 2. ACKNOWLEDGEMENT The researcher is first of all thankful to the Almighty for providing abundant grace, good health and knowledge to do this research project. A deep sense of gratitude is expressed to Mr. V. R Venkatadri, Principal, Institute of Hotel Management Bangalore, for making this study possible. The researcher is indebted to Dr.S. Kannan (HOD), Institute of Hotel Management, Bangalore for his guidance, generous advice, great enthusiasm, scholastic attitude and constant Inspiration. The researcher would like to thank Mr. Pramod Naick (Senior Lecturer) Institute of Hotel Management, Bangalore for his inspiration and enthusiasm for this project and also for always making himself available to assist for this collection. Above all the researcher is grateful to the members of his family and colleagues, without whose love and constant support, this study would not have been possible. Sansar Birman (Researcher) (II)
  3. 3. TABLE OF CONTENTS PAGE NO. LIST OF TABLES V LIST OF FIGURES VI-VII CHAPTERS 1 - 79 1. INTRODUCTION 1 - 22 Company profile Statement of the problem Objectives Limitations 2. REVIEW OF RELATED LITERATURE 23 - 50 3. RESEARCH METHODOLOGY 51 - 53 Research Objective Thesis Analysis Methods 4. DATA PRESENTATION AND INTERPRETATION Analysis of data Discussion of findings (III) 54 - 67
  4. 4. 5. CONCLUSIONS AND RECOMMENDATIONS 68 - 70 Conclusions Recommendations APPENDIX 71 - 76 BIBLIOGRAPHY 77 - 79 Books Journals and Periodicals Websites (IV)
  5. 5. LIST OF TABLES SL. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. TABLE The brief background of McDonald’s Journey of McDonald’s Overall response of Consumers and Employees Table showing responses on visit to McDonald's Table showing response on product knowledge of McDonald’s Table showing response on McDonald's menu revision Table showing response on constraints from eating at McDonald’s Table showing response on accessibility to the nearest McDonald's Table showing response on Marketing strategies used by McDonald’s Table showing response that McDonald's have enough promotions in Bangalore or not Table showing response on increase in sales by introduction of happy price menu Table showing response on the biggest competitor of McDonald's (V) PAGE NO.
  6. 6. LIST OF FIGURES SL. PAGE FIGURE NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. NO. McDonald’s logo image Targeting, Positioning and Differentiation McDonald’s in India Distribution of McDonald's McDonald's campaign McDonald's "Happy Price" campaign Product success McDonald’s marketing communication Ansoff Matrix Graph showing overall response of Consumers and Employees Bar diagram showing have you ever been to McDonald's Graph showing when you hear the word 'burger', does McDonald’s come in your mind Graph showing do you think McDonald's need to revise their menu Graph showing what restricts from eating at McDonald’s 15. Graph showing what is the distance of the nearest McDonald's from your place 16. Pie chart showing the Marketing strategies used by McDonald’s Bar diagram showing does McDonald's have enough promotions in Bangalore 17.
  7. 7. 18. 19. 20. Graph showing do you think that introduction of happy price menu has boosted the sales up Graph showing who do you think is the biggest competitor for McDonald's Moment of Truth (VII)
  8. 8. Abstract McDonald's is an international fast food restaurant. They expanded their businesses in global scale. It is obvious that McDonald surpassed other fast food joints in terms of sales and fame in international level. However, in India, KFC performs better than McDonald's now. The aim of this study is to find out how this company developed its marketing strategies differently in Indian market. By making a comparative study of McDonald’s different operation and marketing strategy theory will be integrated with their development situation. Research is made based on strategy theory, Internet sources and interviews. The thesis is started with general information, Indian fast food industrial situation introduction and thesis structure. After having introduced the company background, we illustrated strategy theory as thesis theoretical basis. Next, by comparing McDonald’s marketing strategies, we analyzed the main difference and some similarities comprehensively of McDonald’s and other fast food joints in India. In research finding chapter, we took qualitative finding, it is the main research method we have used. The thesis is ended in conclusion, after main finding, recommendation will be given to improve the present strategies adopted by the McDonald and suggestions will be given for further research. Keywords Comparative study, business strategy, marketing strategy, fast food development in India.
  9. 9. INTRODUCTION COMPANY PROFILE McDonald’s headquarters is located in Oak Brook, Illinois, United State. It is the largest chain of hamburger fast food restaurant in the world. The company logo is McDonald’s with a big yellow “M”. Figure 1 shows that. Richard and Maurice McDonald started the first McDonald's store from 1950s in the US, and it primarily sells hamburgers, French fries, dessert, and salads. In 1955, when the first McDonald's restaurant was founded in the United States, there was not much variety on its menu, but they offered food supply with high quality, low cost and good environment. By 1983, there were more than 6,000 domestic branches. In 1967, McDonald's opened its first overseas branch in Canada. By 1985, its total abroad sales accounted for about 20 per cent of its domestic business. Every day there are more than 18 million people coming to McDonald's in more than 40 countries. Nowadays McDonald's has more than 3,4000 locations worldwide with a revenue of 27.56 billion US dollars. Table 1: The brief background of McDonald’s The name of company McDonald’s Headquarters location: Establishment time: Business field: Company slogan: America The number of employees: 1,800,000 (2013) Fig 1: McDonald’s logo image 1954 Western-style fast food, desserts I’m lovin’ it
  10. 10. BUSINESS STRATEGY FRANCHISE MODEL Only 15% of the total numbers of restaurants are owned by the company. The remaining 85% is operated by franchisees. The company follows a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the quality, service, cleanliness and value propositions offered by the company to its customers. PRODUCT CONSISTENCY By developing a sophisticated supplier networked operation and distribution system, the company has been able to achieve consistent product taste and quality across geographies. ACT LIKE A RETAILER AND THINK LIKE A BRAND McDonald’s focuses not only on delivering sales for the immediate present, but also protecting its long term brand reputation. RE-ENGINEERING THE MENU McDonald’s thinks according to the customer’s tastes, value systems, lifestyle, language and perception. Globally McDonald’s was famous for its hamburgers which are prepared from beef and pork burgers. But, most Indians religion does not allow them to consume beef or pork. So in order to satisfy demand as per Indian preference, McDonald’s came up with chicken and fish burgers to suite the Indian diet.
  11. 11. THE VEGITERIAN CUSTOMER India has a huge population of vegetarians. To satisfy this customer’s demand, the company came up with a completely new menu of vegetarian items and non-vegetarian sections is maintained throughout the various stages. SEGMENTATION, TARGETING AND POSITIONING McDonald’s uses demographic segmentation strategy with age as the parameter. The main target segments are children, youth and the young urban family. If they take children into consideration, children are more attracted towards toys and delicious meals including today’s youth prefer such places for their entertainment and the urban families select McDonald’s on various occasion like birthday party, treat to their children etc. Kids are on the top most level in FMCG purchased related to food products. Figure 2: Targeting, Positioning and Differentiation
  12. 12. So to attract children, McDonald’s has Happy Meal in which they gift one toy on each happy meal, there are toys ranging from hot wheels to various Walt Disney characters. Example of the latest range is the toys of the movie Madagascar. For this, they have a tie-up with Walt Disney. At several outlets, it also provides special facilities like ‘Playing Place’ where children can play arcade games, air hockey, etc. Thus strategy is targeting in making McDonald’s a fun place where customers can enjoy both playing and eating. This also helps McDonald’s to attract the young urban families who wanted to spend some quality time, while their children can enjoy every movement of McDonald’s. To target the teenagers and young youth, McDonald’s has priced several products aggressively, keeping in mind the price sensitivity of this target customer.
  13. 13. JOURNEY OF MCDONALD’S Year  1955 Events  Ray Kroc opens his first restaurant in Des Plaines, Illinois and the McDonald’s Corporation is created.  1957  Quality, service, cleanliness and value (QSC&V) becomes the company motto.  1959  The 100th McDonald’s opened in Chicago.  1961  Hamburger University opens in Elk Grove, near Chicago.  1963  One Billion hamburgers sold. Ronald McDonald makes his debut.  1964  Fillet-o-fish sandwich is introduced  1965  McDonald’s Corporation goes public.  1968  The big Mac is introduced. The 1000th restaurant opened in Des Plaines, Illinois.  1972  A new McDonald’s restaurant opens every day.  1973  Egg McMuffin is introduced.  1983  Chicken McNuggets is introduced. New Hamburger University campus opens in Oak Brook, Illinois. Set in 80 wooded acres. Training is provided for entry level of McDonald’s management worldwide.  1984  50 billionth hamburger sold. Ronald McDonald Children’s Charities is founded in Ray Kroc’s memory to raise funds in
  14. 14. support of child welfare.  1989  McDonald’s opens in Pushkin Square and Gorky Street, Moscow.  1996  McDonald’s opens in India – the 95th country.  1994  Restaurants open in Bahrain, Bulgaria, Egypt, Kuwait, Latvia, and Oman. Table 2: Journey of McDonald’s
  15. 15. MARKETING OBJECTIVES A marketing plan must be created to meet clear objectives. Objectives guide marketing actions and are used to measure how well a plan is working. These can be related to market share, sales and goals, reaching the target audience and creating awareness in the marketplace. The objectives communicate what marketers want to achieve. Long –term objectives are broken down into shorter-term measurable targets, which McDonald’s uses as milestones along the way. Results can be analyzed regularly to see whether objectives are being met. This type of feedback allows the company to change plans. It gives flexibility. Once marketing objectives are set the next stage is to define how they will be achieved. The marketing strategy is the statement of how objectives will be delivered. It explains what marketing actions and resources will be used and how they will work together.  McDonald’s plans to open as many as 140 restaurants throughout India this year, focusing on drive-through outlets.  Investment of more than Rs.400crores in the next two years to expand its operations.  Transform itself into a high-volume, mass-market brand with compounded annual growth at around 30 percent to 35 percent in the next few years.  Addition of franchisees as current 75% income generated is from franchisee centres affiliated to McDonald’s.  Moving out of the metros and concentrate its efforts on other mid-sized cities in providing service. The plan is to enter a new city, understand
  16. 16. the market and then multiply by opening up more outlets in these cities rather than spreading to too many cities at a time.  Increase the number of customers turning up at its restaurants by providing the same service and quality by achieving 100% customer satisfaction.  Target on customers between age- groups 24-38 with children’s to position itself as a family restaurant and the ideal place for kids and teenagers.  Increase brand loyalty among customers. To build a new generation who will stay with the brand and then emerge as a long term player.  Introduce new innovative menus by development of new products, which cater to peoples’ needs by keeping Indian tastes in mind and to provide greater choice whilst ensuring that the products meet the requirements of a balanced diet, so that the crowds keep pouring through the doors.
  17. 17. MANAGEMENT PROCESS McDonald’s management process has a lot to do with the following managerial steps. PLANNING A plan can play a vital role in helping to avoid mistakes or recognize hidden opportunities. Preparing a satisfactory plan of the organization is essential. The planning process enables management to understand more clearly what they want to achieve, and how and when they can do it. A well prepared business plan demonstrates that the managers know the business and that they thought through its development in terms of products, management, finances, and most importantly, markets and competition. Planning helps in forecasting the future, makes the future visible to some extent, it bridges between where and we are and where we want to go. Planning is looking ahead. At McDonald’s, planning is done with great concentration keeping all the environmental aspects in view. Planning at McDonald’s is done before taking up every step like before entering into a new market. Setting up a new franchise requires the management to look at the determinants of demand and supply in that particular region. Market research is conducted by research and development department. A through survey is conducted about the demographics and behavioural aspects of the markets’ potential customers. In Punjab acceptance level of fast food is higher than other provinces and so McDonald’s planning seeks to figure out the existing market trends in Punjab so to be in a better position to capitalize upon the opportunities. Consumers taste patterns and cultural variables are brought into consideration and then a decision is made which region McDonald’s should enter into and which area can be left alone. Apart from entering into new markets, existing markets are constantly under observations, and planning is done before launching any new product. The appropriate match between the consumers taste and product is judged by the management by product testing. R&D department takes the
  18. 18. responsibility of such planning. Operational planning is another key area in McDonald’s. Plans are laid out while deciding about selection of suppliers. What resources McDonald’s should create for itself and which resources should be outsourced are planned out. Financial planning, as told by the McDonald’s management, is a vital area for its economic success. Finance department has hired qualified and skilled accountants who plan and approve of the marketing, HR and production budgets. All the planning done by finance department is sent to higher management for further study and approval. ORGANIZING Organizing at McDonald’s is done by every department on its own based on the activities performed. However mutual coordination and communication is intense so to keep the objectives of all the departments in alignment. McDonald’s management does organizing by work specialization to minimize the interference of unconcerned people which causes a delay in implementation of planning. For example, the finance department organizes its work among accountants, auditors, and forecasters. Marketing department has allocated certain people. Brand managers are there to work in association with R&D department to keep a check on brand performance by conducting brand audits and brand tracking. Regional managers are there to look at the regions sales, take the problems into account, taking immediate action within the authorities , forwarding the problems to concerned authorities, for example if sales trend in a region goes down without overt reasons, brand management is informed to seek out the reasons and suggest solutions. Brand managers are made responsible for keeping command over operational activities. Customer cares, branch maintenance secure transaction , security checks, and sustaining healthy environment is their responsibility. All of these activities are in mutual coordination and the interdepartmental mobile communication channel is held
  19. 19. responsible for upholding the highest level of coordination among departments. LEADING Every organization needs strong leaders who can lead the employees by motivating, guiding and directing them. McDonald’s has been blessed with efficient employees as ensured by its strong recruitment and selection policy. First of all the leadership qualities of a branch manager are vitally important for McDonald’s the ground staff who are in contact with the customers need to be motivated in order to deliver high service standards. The standardization of service criteria of McDonald’s requires high competencies of employees who are working close to the customer as they are the one who will please or displease a customer on the spot. So in this case the leadership quality of a branch manager comes out to be more important. He needs to guide, direct and keep the staff motivated by setting high examples of commitment and professionalism. He has to be vigilant as well as tenacious for that. McDonald’s training and development staff ensures to transfer good leadership tactics to the branch managers. The managing director of McDonald’s holds special events and personally meets those employees who get the best performance awards at all 20 restaurants countrywide. This inspires the ground employees to work harder and show high performance. Another way of leading is to set high performance standards. CONTROLLING Controlling becomes a vital phenomenon in an organization as grows larger and larger. With expanding resources and areas of business becoming bigger brings some serious concerns for management to keep control over all the facets of the organizational resources and dimensions of business. McDonald’s has become a multinational working in more than 100 countries and running more than 30,000 restaurants around the world. This is huge controlling in this
  20. 20. case becomes a pulse for the business. There has to be a system in place for controlling factor and all the management has to be on its toes in order to make sure the smooth and right running of the business. McDonald’s in this area has excelled over the period of time feeling and realizing the need of having tight control over its resources and processes thereby providing the highest level of value to its precious customers. In controlling, McDonald’s emphasizes seriously on financial control. Budgets are allocated to critical success factors appropriately. For that the finance department works in coordination with marketing department. Marketing men pose recommendations to add value in its supply chain to get greater margins. Finance department then considers the feasibility of implementation of those recommendations from financial point of view. For that the financial analysts and charted accountants are there. Finance department again asks marketing department to review the recommendation and points out the key areas where cost can be controlled. Marketing then again analysis the situation and ponders upon the areas which can be forgone to come in balanced state where maximum value can be created for approximate costs. Once the budgets are made with areas defined, the execution patterns are transferred through high communication to lower levels where the actual work has to be done. If the budgets are not communicated properly, there is a high chance of misallocation of financial resources and hence mismanagement. Head of marketing takes over the matters and senior marketing executives are given the charge. They ensure the right use of budgets. If something goes wrong on lower level or even on the same hierarchy, respective personals take actions. Operational controls in another area where serious emphasis has to be made. McDonald’s delivers the fastest burger and other foods delivery to its customers. For that efficiency has to be achieved through proper operations and deployment of skilled employees. Customers concerned are directly conveyed to branch manager who takes on the steps to rectify the manner. No one has to be socks. This is the key. Everyone on the job has to put on the
  21. 21. socks. Improvements in operations are constantly made through proper control. For that right training has to be given to the employees. At McDonald’s, training and development of employees is a vital hand of gaining control over operations. If the employees are rightly trained, they will function in the most efficient manner. Human resource management requires control as well. Having to know the right requirement of human resources depends on the right forecasting of personals. The right selection and recruitment is done through criterion. Once the selection is done, controlling comes into play by providing the employees with right compensation and keeping an eye on their training needs. Training and development department is constantly responsible for providing training.
  22. 22. SWOT ANALYSIS 1. STRENGTHS  GLOBAL BRAND McDonald’s has a very well-established global brand that appeals to all age groups and customer segments. In 2005, McDonald’s placed ninth in the top 100 global brands ranking of business week magazine and interbrand, a branding consultancy.  STRONG OPERATIONAL CAPABILITIES McDonald’s has strong operational capabilities which allow it to provide high quality products and customer service across its restaurants. The company has a world-class supply cain and standardized processes to deliver products of uniform quality across restaurants, regardless of their location or nature of operation (company-owned or franchisee-operated). The company and its partners purchase food and related items from an approved group of suppliers.  SUCCESSFUL ITEMS Some of its products such as Big Mac, Chicken McNuggets have become brands in their own right. Strong brand draws customers to the company’s restaurants and provides it with a recognized brand currency in new markets.  QUALITY PRODUCTS McDonald’s is the symbol of quality with respect to its offering. 2. WEAKNESS  WEAK REVENUE GROWTH Low revenue growth suggests that the company has not been able to expand customer traffic at existing restaurants thanks mainly to the maturation and saturation of its key markets.  WEAK PRODUCT DEVELOPMENT
  23. 23. McDonald’s Faces a strong competition and its weak product development creates problem. 3. OPPORTUNITIES  EXPANSION There is a large market for McDonald’s still to serve. Furthermore it has few outlets within cities in which it is currently serving, so McDonald’s also has opportunity to expand within cities.  FRANCHISEE-OPERATED RESTAURANTS McDonald’s intends to sell about company-operated restaurants to franchisees. The operating margin of franchisee-operated restaurants is higher than that of company-operated restaurants. The sale of company-operated restaurants to franchisees is likely to increase the overall profitability of McDonald’s business.  GROWING DINING-OUT MARKET As the lifestyle trends of consumers are changing, the dining out market is growing, that would serve as an opportunity for the McDonald’s. 4. THREATS  INTENSE COMPETITION McDonald’s restaurants face intense competition from international, national, regional and local retailers of food products. The company competes on the basis of price, convenience, service and quality of food products. The company’s competition includes restaurants, quick service eating establishments, pizza parlours, coffee shops, street vendors, convenience food stores, delicatessens and supermarkets.  GROWING HEALTH CONSCIOUSNESS
  24. 24. As the education level has increased, health consciousness has also increased. A growing consciousness of health matters could reduce McDonald’s revenues.  INCREASED SALES TAX Sales tax has increased which results in the increased customer prices and reduced sales level. Marketing strategy is very much important for developing any of the business. Without it, the effort of the business to attract customer is random and very inefficient. The main focus of the strategy must make sure that the product should fulfil the demands of the consumers and as well as it maintains the long-term relationship with those consumers. To achieve this, it will have to initiate flexible strategy that responds to change in customer demand and perception. It may also give brand name to the product which will help you to run the business in new markets smooth and efficient manner. First of all the main purpose of the marketing strategy should be to identify the weather the target customer’s are satisfied with the product and services of business. Once the strategy is created and implemented, try to identify the feed from the customer and if any changes or improvement is required apply it to the maximum satisfaction of customers. This helps to identify that, where the strategy needs to be improved and how it can be developed, so that it can be implemented for effective action. Before applying any strategy in the business proper planning programs must be organized within the members of the organization. A marketing strategy defines and describes the objectives or planning through which we are going to satisfy our consumer needs in the selected target market. It does not involve written work but, it includes communication
  25. 25. between different departments of the business enterprise for example sales department, managers, executives etc. In fact it is a set of strategies that is implied by the organization in order to increase the growth and development of the business. Normally strategy deals with the manner in which the organization plan to achieve the consumer satisfaction and maximize the profit. In today's world of cutthroat fierce competition, customer satisfaction is very essential to not only exist but also to excel in the market. Today's market is enormously more complex. Henceforth, to survive in the market, the company not only needs to maximize its profit but also needs to satisfy its customers and should try to build upon from there. Indian companies for their operational convenience had divided the Indian subcontinent into four zones, the progressive West, the powerful North, the traditional and culturally rich, South and East. McDonald’s opened their first restaurant in the capital of India which is Delhi. The second restaurant was opened in the financial capital of India, Mumbai. McDonald initially concentrated in the West and North regions. Later the company exhibited ambitious plans for expansion in Eastern and Southern regions. McDonald’s restaurant in India In 1996, McDonald's opened in India for the first time, a country where the majority of the population was Hindu and vegetarian, and the cow was sacred. Many saw it as just another example of the relentless spread of Western corporations into every nation, creating a global system in which wealth was drained out of local economies into the hands of a very (Volume 1, Issue 2 (Jan. 31, 2009) OJICA-Online Journal of International Case Analysis 3) few, very rich elite. McDonald’s opened its doors in India in October 1996, demonstrating what the McDonald’s experience was all about. McDonald’s in India was a 50-50 joint venture partnership between McDonald’s Corporation (U.S.A.) and two Indian businessmen. Amit Jatia’s company, Hardcastle Restaurants Pvt. Ltd., owned and operated McDonald’s restaurants in Western
  26. 26. India, while Connaught Plaza Restaurants Pvt. Ltd., headed by Vikram Bakshi, owned and operated the North Indian operations. These companies signed their joint-venture agreements with McDonald's in April 1995 and venture along with their Indian management team trained in McDonald's restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India. McDonald’s currently has 300 restaurants in India of which 145 are in North s & East India and 155 in West & South India. India Fig 3: McDonald’s in India RAYMOND KROC
  27. 27. VIKRAM BAKSI AMIT JATIA MISSION STATEMENT “McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant customer smile. India as a market was a unique example of diversity. Divided into 28 states and 7 union territories, the vegetation, climate, religion, language, clothing, and food varied from one state to another. With the combination of spices in a unique way, food of these states reflected their traditions and culture. Hence hese the biggest challenge to any food business in India definitely was about balancing the diversity and the product offerings. In November 2004, McDonald’s entered southern part of India with its fir first restaurant in Bangalore, the so called silicon valley of India. McDonald’s got clearance from Foreign Investment Promotion Board (FIPB) of India in 1991. But it was only after five years of preparation, that the first
  28. 28. restaurant became operational in 1996. It worked on developing local relationships with local partners to facilitate the raw material. When McDonalds started their operations in 1948 the menu consisted of cheese burgers and hamburgers, pie, potato chips and beverages like milk, soft drinks, coffee. The cost of hamburger at that time was mere 15 cents. Now it is the largest food chain all over the world. By 1965 McDonalds had 700 restaurants. McDonalds all over the worlds are aligned by Global strategy of plan to win. This strategy focuses on price, people, customer experience, promotion and place. (McDonald’s History, 2012)
  29. 29. OBJECTIVE OF THE STUDY The primary objective of study is Marketing Strategies adopted by "Mc Donald's". The objective is supported by five secondary objectives, achieving them will lead to the fulfillment of primary objective. They include: 1. To identify the marketing strategies used by McDonald’s. 2. To analyze the standard of customer satisfaction for products offered by McDonald’s. 3. To identify different activities followed by McDonald’s in order to establish itself in market. 4. To analyze the effectivity of marketing strategies adopted by McDonald’s. 5. To highlight on different aspects that a service based food chain must follow in order to increase its market share and for being on a continuous growth stage.
  30. 30. LIMITATIONS 1. The analysis is done on 110 (100+10) questionnaires in limited area i.e. Bangalore city. 2. McDonald’s did not agree to show the record of performance of any of their specific eatables. 3. 100% response rate is not found from the respondents. Some extent of biasness is found because of Brand loyalty while answering the questions. 4. Potential biases such as reluctance of consumers, executives etc. 5. Lack of interest of the respondent is one of the major problems. 6. The Geographic extent of this study is limited to the Bangalore market only. 7. The researcher has tried to present a bird’s eye view and it may not be an in depth study.
  31. 31. REVIEW OF LITERATURE The “think global and act local” strategy brought McDonald's competitive advantage in the fast-food industry. They customized their marketing strategies based on the cultural, economical and socio political factors of different nations (Cooper & Edgett, 2009). Adapting and executing this strategy, the company is capable of adjusting their products and services to the preference of their local consumers. This is also why you see difference in their global branches in prices, atmosphere, advertisement tools and even the architecture. Target Marketing: Value propositions had to be directed to the right target market to establish a new product. An interesting question was who would eat at McDonald’s? In order to develop the marketing strategy, it was important for any company to understand the consumer market. The more one knew and understood about consumers, the more effectively one could communicate and market to them. Four aspects of consumer behaviour which needed to be examined to understand a consumer market were the ability of the people to buy, consumer needs, buying motives and the buying process. The initial attempt of McDonald’s was to induce trials and get the customers into the restaurants. Word of mouth and advertising was expected to reveal the experience of eating at McDonald’s. The localization strategy is beneficial for anticipating the changing needs and preferences of the consumers within the industry. It also creates such operational efficiency, which enables to absorb changes frequently (Barnes,
  32. 32. 2008). If any changes occur in one country - McDonald's has to adjust only that country specific strategy rather than entire global strategy. Until 2000, McDonalds advertised their brand mainly by putting the main focus on the outlet design and tailor made food menu for the needs and desires of the diverse Indian population. (Chaturvedi, P.) Strategies in India In order to capitalize on the highly price sensitive economy, and the Indian mentality of liking anything that is foreign, McDonald’s strategy was market penetration and the three circles strategy. This led to localization ND branding of the company. The entry of almost all the international brands into India happened at the same time, while others closed down due to various strategies. McDonald’s survived only due to keen understanding of the Indian economy. Pricing Food pricing was a sensitive issue in India. An ideal strategy was to focus on customer’s ability to pay and tap the rich and upper middleclass population in India. Although McDonald’s strategy was to increase sales volumes by making products available at affordable price, its products were perceived to be expensive. The company outlets in Delhi and Mumbai initially were opened due to the increased affordability of people with western exposure and brand recognition factors in metros. Additionally, people in the metros were open to experiment with variety of foods. Absorption of newer cultures was faster in the Metros than other areas.
  33. 33. The mass markets in India were price sensitive. The positive factors were the growth in consumer markets with rapid growth in disposable incomes, development of modern urban lifestyles and the demand for value. Marketing Initiatives at McDonald’s When operations in India began, initially McDonald’s positioned itself as a place to visit with the baseline "McDonald's mein hain kuch baat" (“There’s definitely something about McDonald’s”) in their advertisements. People were encouraged to try the McDonald's experience. However, over the years, after McDonald's had been hugely accepted by Indian customers, there was a need to evolve the communication strategy and move on from trying to encourage and motivate people to visit for the first time to making McDonald's a regular experience. After McDonald’s established itself and people knew what McDonald's was all about, the baseline was changed to “Toh aaj McDonald's ho jaye" (“Let it be McDonald’s for today”), which talked about an everyday experience. The objective was to continue positioning McDonald's as a comfort zone for families. Local Sourcing McDonald's sourced its requirements from local suppliers and farmers, and maintained its adherence to Indian Government regulations on food, health and hygiene. McDonald's India purchased more than 96% of its products and supplies from Indian suppliers even constructing restaurants using local architects, contractors, local material (wherever possible), and hired local personnel for all positions within the restaurants and contributed a portion of its success to communities in the form of municipal taxes and reinvestment.
  34. 34. McDonald’s described the relationships between itself and its Indian suppliers as mutually beneficial, reasoning that as McDonald's expanded in India, suppliers would continue to get the opportunity to expand their businesses, access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export. McDonald’s India is a joint venture company managed by Indian’s. McDonald’s India, a subsidiary of McDonald’s USA, has expanded its presence in India via two joint venture companies – Connaught Plaza restaurants and Hard Castle restaurants. McDonald’s India has a 50 percent equity stake each in both joint venture companies. Connaught Plaza restaurants manages operations and expansions across North India (Delhi, jaipur and Punjab) managed by Vikram Bakshi. Hard Castle restaurants which is managed by Amit Jatia, manages operations and expansion across western India (Mumbai, Pune and Gujarat). Mr.Saranan Laxaman is a Development Licensee for the one and only Bangalore property so far under the flagship of Golden Kitchen Pvt. Ltd. Which was unveiled in October 2004. In order to capitalize on the highly price sensitive economy, and the Indian mentality of liking anything that is foreign, McDonald’s strategy is market penetration and the three circles strategy. This led to the localization and branding of the company. The entry of almost all the international brands into India happened at the same time, while others closed down due to various strategies. McDonald’s survived only due to keen understanding of the Indian economy. The massive and aggressive expansion strategies that McDonald’s took up in India was with the sole objective of establishing its presence indelibly in the sub continent and to prove to the world that if anything can sell in India it can
  35. 35. sell anywhere. Today McDonald’s has become a household name and finds its kiosks in almost many schools colleges and corporate. It can be said that there is no food court without a McDonald’s and almost every Indian has tasted McDonald’s fast food. This is indeed a great breakthrough for a very orthodox community that has very rigid and fixed eating habits and traditionally very Indian. McDonald’s had to make it clear to the authorities that their products in India neither contain beef nor pork in it. They had to suit their burgers to Indian taste and Indian market which was a hyper price sensitive market. The introduction of breakfast combos and budget meals made market penetration possible. “Aloo Tikki Burger” was McDonald’s priced product in India. Their quick turnaround times made new inroads into the fast food industry. (Mathur, S., 2011) Figure 4 Distribution of McDonald's
  36. 36. When McDonald's India launched in 1996, urban Indians in Mumbai and Delhi typically ate out three to fives times a month, according to AT Kearney, the management consultancy. In the 12 years since then, that average frequency has doubled and analysts forecast that by 2011 the Indian quick service restaurant market will be worth 30,000 crore (about $6.3bn at October 2008 exchange rates). But from their earliest investments in India, multinational company (MNC) owners of restaurant chains have struggled to adapt to the needs of India's many markets. Some pulled out of the country after failed ventures. At the time, consolidation of the hugely fragmented Indian retail sector had also barely begun, and there was scepticism that Indians would prefer burgers and fast food to local food offerings. However, in the intervening decade, McDonald's has continued to open new outlets in the country, evolving its marketing strategy through several phases. Twelve years of McDonald's India McDonald's India was set up as a 50:50 joint-venture between McDonald's at a global level and regional Indian partners such as Hardcastle Restaurants Private Limited in western India, and Connaught Plaza Restaurants Private Limited in northern India. The first Indian McDonald's outlet opened in Mumbai in 1996. Since then, outlets have begun trading in metropolitan and Tier II towns across the country. By September 2008, it had premises in Mumbai, Bangalore, Baroda, Pune, Indore, Nasik, Chennai, Hyderabad, Surat and Ahmedabad.
  37. 37. Amit Jatia, Managing Director, McDonalds India, said: "The past decade has witnessed a marked change in Indian consumption patterns, especially in terms of food. Households in middle, upper, and high-income categories now have higher disposable income per member and a propensity to spend more." Phase I: Launching the brand The starting point for McDonald's India was to change Indian consumers' perceptions, which associated it with being 'foreign', 'American', 'not knowing what to expect' and 'discomfort with the new or different'. McDonald's wanted to position itself as 'Indian' and a promoter of 'family values and culture', as well as being 'comfortable and easy'. Simultaneously, the brand wanted to communicate that, operationally, it was committed to maintaining a quality service, cleanliness and offering value for money. Says Arvind Singhal, Head of Marketing at McDonald's India: "From a marketing communications standpoint, we chose to focus on familiarizing the customer with the brand. The brand was built on establishing functional benefits as well as experiential marketing." Until 2000, McDonald's India did not have enough reach to use mass media such as television advertising. Instead, most of its marketing effort focused on outlet design, new store openings and PR about its attempts to tailor a menu to Indian tastes. Amit Jatia said: "Products like McAloo Tikki burger, Veg Pizza McPuff and Chicken McGrill burger were formulated and introduced using spices favored by Indians. The menu development team has been responsible for special sauces which use local spices do not contain beef and pork. Other products do not contain eggs and are 100% vegetarian. The Indianized products have been so well received that we even export McAloo Tikki™ burger and Veg. Pizza McPuff™ to the Middle East."
  38. 38. However the company did not escape food criticism in the country. For instance, it hurt the religious sentiments of Indians by using beef flavoring for its "Vegetarian" French Fries. Says Sridhar, National Creative Director, Leo Burnett: "When McDonald's launched we took a conscious call of not introducing any beef or pork in our products. Thus, when controversies around McDonald's products started during the early and growth stages of the Indian business, we reacted quickly. "We educated our customers about the build of our products and did extensive kitchen tours for our customers. We showed them how we use separate vegetarian and non-vegetarian platforms for cooking – a first in any market for McDonald's." II Phase: brand advertising By 2000, McDonald's India was ready to begin TV advertising. Arvind Singhal said: "The first Indian TV commercial, Stage Fright, attempted to establish an emotional connection between the (Indian) family and the brand. Over the years advertising has reinforced this positioning, supported by promotions." The Stage Fright campaign aimed to establish McDonald's as a familiar, comfortable place. It featured a child who suffers stage fright and is unable to recite a poem. On entering McDonald's, he easily recites it in the store's familiar environment. A second campaign featured a child and his family moving into a new place. He misses his previous surroundings – until McDonald's provides something familiar.
  39. 39. Fig 5: A still from the Leo Burnett/McDonald's campaign featuring a family moving home These storylines were supported by other initiatives. The company's oneminute service guarantee attempted to reinforce its reputation for fast, friendly and accurate service and it also ran in-store events for mothers and children. Mr Singhal says: "To kids sitting on the Ronald McDonald bench, pumping sauce from the sauce machine became brand rituals." K.V. Sridhar, National Creative Director, Leo Burnett, the company's agency in India, adds: "In the launch phase the communication focused solely on building brand and product relevance. The brand's scores on relevance to families and kids were very high." Later, McDonald's realized there was untapped potential in the youth audience who considered McDonald's expensive and mainly for children. Sridhar says: "In 2004, we launched the Happy Price Menu with a value message for a younger audience. For the first time McDonald's India saw a surge of younger consumers and people from socio-economic class B walk into our stores. "We had realized that the Indian consumer was price sensitive and even though the organization managed to establish a sense of familiarity, Indian consumers continued to perceive McDonald's as an expensive eating out option."
  40. 40. Fig 6: McDonald's "Happy Price" campaign Phase III: Appealing to both ends of the age spectrum In 2008, the latest campaign from the McDonalds-Leo Burnett stable uses father-son duos from the Indian film industry to reiterate the theme of "Yesteryear's Prices". It features Bollywood stars from past decades together with their sons and a message that prices have not risen in line with the passage of time.
  41. 41. The Happy Price campaign has also been promoted via virals. Outdoor has also promoted a home delivery option in a country where home delivery is common in urban areas. McDonald's has also been exploring strategic tie-ups with Indian sports properties such as the IPL cricket tournament, where it was one of the event's food providers. Amit Jatia, however, says: "The eating out market in India is very large and has huge potential fuelled by rising disposable incomes. There are many Indian and international players who have entered in the market since the last decade and unbranded food chains have also grown significantly. "The Indian consumer has seen value in what we have to offer at our restaurants which is a testament to our model." (Chaturvedi, P.)
  42. 42. MCDONALD’S MARKETING MIX (5P’S) STRATEGY After analyzing the market, finding he key factor, target segment and understanding the market demand, every company needs to come up with an offers or such type of plan, that speed up the growth of the company. For which McDonald’s uses 5p’s of marketing mix which are as follows: 1. PRODUCT 2. PLACE 3. PRICE 4. PROMOTION 5. PEOPLE PRODUCT: Product includes that, how the company should design, manufacture the product so that it enhance the customer experience? Figure 7: Product success
  43. 43. Product is the physical product or services offered by the company to its customers. McDonald’s includes certain aspects of its product such as packaging, desirability, looks etc. This consists of both tangible and nontangible aspects of the product and services. McDonald’s has purposely kept its product depth and product width limited. McDonald’s had first studied the behaviour of the Indian customer and provided a totally different menu as compared to its menu offered in international market. It removed pork, beef and mutton burgers from the menu. India is the only country where McDonald’s serve vegetarian menu. Even the sauces and cheese used in India are 100% vegetarian. McDonald’s continuously innovates its products according to the changing preferences of its customers. McDonald’s brings best quality products and best features as per the preference and demand of the target market.
  44. 44. PLACE: The place mainly consists of distribution channels and outlets of the company. It is considered as very important because the product must be available to the customer at the right place, at the right time and in the right quantity. There are certain degree of fun and happiness that McDonald’s provides to its customers. It provides value position based on the needs of the customer. McDonald’s offers proper hygienic atmosphere, good ambiance and better services. Now McDonald’s have also started offering internet facilities at their outlets, along with music system through radio, not the normal music but the music which is preferred by young generation in order to attract them. PRICE: Pricing strategy is the most important aspect of marketing mix. It includes price list, if any discount available or payment facility available. It should also take into consideration the possible reaction from its competitors regarding the pricing. Pricing is very much necessary because it is this part, which decides revenue for the business unit. All the other three ere the expenses incurred in the business. The price needs to take demand and supply equation into consideration by analyzing the pricing demand as per Indian market. McDonald’s came up with a very grasping punch line “Aap ke zamane mein, baap ke zamane ke daam”. The pricing strategy was founded to attract middle class and lower class people and the effect can clearly be seen in the consumer base that McDonald’s has now.
  45. 45. McDonald’s has certain value pricing and bundling strategies such as happy meal, combo meal, family meal, happy price menu etc to increase overall sales of the product. PROMOTION: Advertising Personal Selling Marketing Communications Sales Promotion Mix Public Relations Fig 8: McDonald’s marketing communication Direct Marketing The promotional activities adopted by the McDonald’s helps to communicate efficiently with the target customers. The diagram gives idea about the promotion strategy of McDonald’s. Application of above mentioned communication mix describes the cost that is feasible as per the consumers. Some of the most famous marketing campaigns of McDonald’s are: “You deserve a break today, so get up and get away- to McDonald’s”
  46. 46. “Aap ke zamane mein, Baap ke zamane ke daam”. “Food, Folks and Fun” “I’m loving it”. McDonald’s corporate used advertising, personal selling, sales promotion, public relations, and direct marketing and became world’s largest leading Burger Empire. These five promotion tools are used by McDonald’s to integrate marketing communication program which allows McDonald’s to access the communication channels clearly, consistently and easily transfers messages and product to the target audiences. SETTING THE PROMOTION MIX ADVERTISING An advertisement is targeted to attract the masses it reaches to large number of people at a time. Advertising is one of the most important tools for promotion which had various ways of advertisement in that advertisement through billboards and media are often used by any of the business enterprise. Consumers mostly perceive goods which are advertised goods, as they assume it is more rightful. Due to distinct features of advertisement McDonald’s also hold the hand of advertising. There are three main objectives of advertising for McDonald’s are to make people aware of an item, feel positive about it and remember it. The right message has to be communicated to the right people through the right media. McDonald’s does its promotion through television, hoardings and bus shelters. They use print ads and the television programmes which are also an important marketing medium for promotion.
  47. 47. PERSONAL SELLING Personal selling is most effective tool for building buyers preference, convenience and actions. Personal interaction allows knowing for feedback and adjustments if required. If the organization had a good relationship with buyers they are attentive towards personal selling. In personal selling McDonald’s employees working in different outlets are the best example of personal interaction, the employees are directly serving the customers so, and the face to face communication is easily possible. In the McDonald’s outlet there are such staff which are appointed for personal selling they are the one who perform the activities regarding selling up of goods to customers. SALES PROMOTION Sales promotion activity consist of promoting the business unit through organizing various contest, programmes, functions, distribution of free discounts coupons etc that attracts attention of the customers, also offers strong purchase incentives, dramatizes offers, boosts sagging sales stimulate quick response; short-lived; not effective at building long-term brand preferences. McDonald’s organizes several sales promoting contest and programmes in different retail markets and outlets in which they distributes free discounts. The statue of mascot McDonald’s is always there for any occasions that are also one of the logo of McDonald’s. PUBLIC RELATIONS Highly credible; very believable; many forms: news stories, news features, events and sponsorships etc; reaches many prospects missed by means of other forms of promotion; dramatizes company or product; often the most
  48. 48. under used element in the promotional mix; relatively inexpensive(certainly not ‘free’ as many people think- there are costs involved). Public relations are also an important part of the McDonald’s marketing strategy. The restaurant employees play a huge role in interacting with the public. On a day-to-day basis the employees commit themselves to customer and the customer’s feelings toward the brand. McDonald’s feels that before they communicate with their customers they need to be aware of what their competitors are communicating, so they can create a beneficial difference between themselves and the competitors. DIRECT MARKETING Many forms: telephone marketing, direct mail, online marketing, etc. Four distinctive characterstics: Nonpublic, immediate, customized, interactive;well suited to highly-targeted marketing efforts. Direct marketing is also one of the efficient tools for promotion. The McDonald’s uses tool in the home delivery services in which they directly serve the order to their home. Also they have a websites which are more in preference for direct marketing in that they usually mentioned all the new offers along with the contact number of your nearby outlets. PEOPLE McDonald’s understands the importance of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. McDonald’s continuously does internal marketing because if the internal marketing is effective it will automatically lead to in the success of external marketing. Internal marketing includes hiring, training and motivating employees. In this way they can easily serve customers and the result will be the smiling faces of
  49. 49. the customers. The level of importance has to be placed in the following order (the more important people are at the top): 1. Customers 2. Front line employees 3. Middle level managers 4. Front line managers The punch line “I’m loving it” is an attempt to show that the employees are loving their work at McDonald’s and will love to serve the customers. ADVERTISING STRATEGY There have been many McDonald’s advertising strategy and slogans over the years. McDonald’s is one of the most widespread fast food advertisers. McDonald’s Canada’s corporate website says that the business campaigns have always focused on the “overall McDonald’s experience”, rather than just product. The purpose of the image has always been portraying warmth and a real slice of everyday life. Its TV ads, showing various people engaging in popular activities, usually reflect the season and time period. Finally, they have never in their advertising history used negative or comparison ads pertaining to any of their competitors; the ads have always focused only on McDonald’s alone. McDonald’s has for decades maintained an extensive advertising campaign. In addition to the usual media television, radio, and newspaper, the company makes significant use of billboards and signage, sponsors sporting events ranging from little league to the Olympic games. BRANDING AND BRAND LOYALTY When you see the golden arches, what is the first thing that comes to your mind? Or what about when you see Ronald the clown, what comes to your
  50. 50. mind? Finally, what has 2 all, special sauce, lettuce salad on a sesames bun? Hmmm.... sounds a lot like McDonald’s knows how to capture your attention. One of the things that McDonald’s has proved is that they are good at building its brand loyalty. Even young children know that when you see the golden arches, that you are close to a McDonald’s. With its international expansion efforts, McDonald’s has become one of the most recognized brands worldwide. A couple of the things that has helped to build McDonald’s brand is their constantly changing menu and brand packaging that meets the needs of their consumers. POSITIONING STRATEGY McDonald’s positions itself as the leader in quick service restaurants. In order to maintain their standard, they have started marketing to a younger set of persons, much in the same way that their “I’m loving it” campaign does. Users and non-users alike will use the club McDonald’s to their advantage. They expect that their younger target will seek out memberships in club McDonald’s. The online points tracker and profile will add to the innovation factor. No need of paperwork when figuring out your point totals and prize eligibility. This is easy to use aspect of the promotion is appealing to those who were born with computers. Club McDonald’s is targeted at younger people who are familiar with credit cards and some of the rewards cards that are part of them. GROWTH STRATEGY McDonald’s growth strategy is based on three elements: 1. Adding restaurants 2. Maximising sales and profits at existing restaurants. 3. Improving profitability.
  51. 51. Maximising sales and profits at existing restaurants will be accomplished through better operations, innovation, product development and refinement, effective marketing and lower development and operating costs. Improved national profitability will be realized as economies of scale are achieved in individual markets and as the company benefits from the domestic infrastructure. SERVICE MANAGEMENT STRATEGY If we take any fast food restaurants the customer attracts firstly through brand and secondly with the most important thing to consider i.e. is services offered to them. If the services of any enterprise is not suitable to customer than it achieve the aim that has been proposed by them. This research describes the service management strategy employed by McDonald’s Corporation in the operation of their fast food restaurant chain. The company’s service management strategy is described within the philosophy culture image of the company, service systems, and human resources are considered. The service of the company is identified through following tools: TRAINING POLICY It is the goal of McDonald’s to develop the highest level of skill among all employees. Therefore, a common training programme has been established to develop staff and to meet the training needs of the company. McDonald’s head of training is responsible for implementing and directing the training programme throughout the company. Operations supervisors and
  52. 52. restaurant management participate in the programme and are responsible for individual restaurant results. THE ANSOFF PRODUCT MARKET GROWTH MATRIX This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies: 1. Market penetration strategy 2. Market development strategy 3. Product development strategy 4. Diversification Figure 9: Ansoff Matrix MARKET PENETRATION STRATEGY Market penetration is one of the four growth strategies of the Product- Market Growth Matrix defined by Ansoff. Market penetration occurs when a company
  53. 53. enters/penetrates a market with current products. The best way to achieve this is by gaining competitor’s customers. Other ways include attracting non-users of your product or convincing current clients to use more of your product/service. Market penetration occurs when the product and market already exists in market. McDonald’s is one most popular brand in fast food in entire world. In 1996, the first McDonald’s opened in India, many thought that this was a wrong move for McDonald’s. Various reasons were laid for this claim. Although, the main reasons lays on the fact that Indians have very different perception about food. McDonald’s, being an American food chain, view breads full meal while Indians view them as snacks. As the time went by, McDonald’s slowly became the part of the Indian landscape and way of life rather than just being an outpost of American culture. Indians soon accepted that the McDonald’s serve are ordinary, thus they are for ordinary people like them. Future more, believes that the introduction of McDonald’s to the Indian society changed the direction of the Indian cultural framework. Along with the rest of the world, India was also McDonalized. MARKET DEVELOPMENT STRATEGY A market development strategy targets non-buying customers in currently targeted segments. It also targets new customers in new segments. A marketing manager has to think about the following questions before implementing a market development strategy: is it profitable? Will it require the introduction of new or modified products? Is the customer and channel well enough researched and understood? The marketing manager uses these four groups to give more focus to the market segment decision: existing customers, competitor customers, nonbuying in current segments, new segments, to focus on market segments. For serving synonymously to the existing customers they are coming up with different menus as per change in taste and preference of their customer e.g.
  54. 54. happy price menu, beverages including milk shakes and cold coffees etc. Also, by keeping in mind their rivals they are introducing products to compete them e.g. to answer the KFC they came up with chicken Mcnuggets. They are adopting pricing policies for non-buying customer and as well as new segments. PRODUCT DEVELOPMENT STRATEGY In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product or service to market. There are two parallel paths involved in the NPD process: one involves the idea generation, product design, and detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating new products within the overall strategic process of product life cycle management used to maintain or grow their market share. McDonald’s is always within the fast-food industry, but frequently markets new burgers. Frequently, when a firm creats new products, it can gain new customers for these products. Hence, new product development can be a crucial business development strategy for firms to stay competitive. McDonald’s are always enhancing their existing product along with it; they also try to introduce new and new products so that they can easily survive in market. DIVERSIFICATION Diversification is a form of growth marketing strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets. Diversification can occur either at the business unit or at the corporate level. At the business unit level, it is most likely to expand into a new segment of an industry in which the business is already in.
  55. 55. At the corporate level, it is generally and it’s also very interesting entering a promising business outside of the scope of the existing business unit. OPERATIONS COMPETITIVE STRATEGY McDonald’s corporation completes in a challenging market segment by providing need-satisfying products to customers. In this segment, ineffective competitors often fail without proper strategies. To sustain its viability, the McDonald’s corporation employs an effective competitive strategy to make it stand out against competitors such as other fast food restaurants. McDonald’s competes on several bases, including: 1. Cost 2. Speed 3. Nutrition Their strongest priority is “making customers happy”. The company recently made strong changes to its process by introducing the “made for you” system. COMPETITOR’S ANALYSIS McDonald’s has been a leading fast-foods outlet in Bangalore. But the outlet understudy has other competitors eating away into its market share. In addition to its traditional rivals- KFC, Dominos, Pizza Hut- the firm encounters new challenges. Jumbo king competes using a back to basics approach of quickly serving up burgers for time-pressed consumers. On the higher end, the KFC has become potent competitor in the quick service field, taking away customers from McDonald’s.
  56. 56. Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm. At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for consumers. This brings us to service and experience based competition which McDonald’s can use for competitive advantage. It is for this overall “food, fun & folks” experience that customers pay a premium over the other competitors. MCDONALD’S COMPETITORS: 1. KFC 2. Pizza hut 3. Dominos pizza COMPETETION BASES SPEED McDonald’s competes on several bases mainly to “make their customers happy” by providing speedy, affordable, and nutritious foods. Through extensive market research and survey, the organization discovered that its customers desire speed as one of the restaurant’s top priorities. Therefore, McDonald’s vision aims to “provide fast, friendly and accurate service”. McDonald’s realizes that specific targets are necessary to measure the performance of speed, and continuously takes relevant measurements to compare actual performance with desired targets. To achieve efficient services times, the company utilizes proven, standardized training processes for its
  57. 57. employees and new drive-thru layouts to reduce service times. Along with the speed, McDonald’s also competes by offering prices at a low cost. COST To offer high quality products at low cost requires efficient processes throughout the entire McDonald’s organization. Once again, this goal is built into their vision statement when they claim that “we will be the most efficient provider so that we can be the best value to the most people”. McDonald’s incorporates several ways of approaching to provide great value to its customers. One strategy that the company has employed for many years is the value meal. The value meal allows customers to buy a sandwich, French fries, and beverage at a discount when purchased together. McDonald’s restaurants offer from seven to twelve value meals, both for their lunch menu and breakfast menu. More recently, McDonald’s began offering a value menu, consisting of many individual items costing only rupees fifty each. The value menu has proved to be very successful and has been since incorporated to the individual stores. NUTRITION McDonald’s third main competitive base is nutrition. The organization understands that health trend is an increasingly popular trend therefore; the organization has recently focused extraordinary efforts to promote their new nutritious choices. Although not specifically built into the organization’s vision, McDonald’s has already introduced many options to achieve this goal. McDonald’s has assembled their Global Advisory Council on balanced lifestyles. This council consists of exercise & obesity specialists, environmentalists, and other professionals to ensure that McDonald’s takes
  58. 58. appropriate steps in helping its customers achieve optimal health. The company is also utilizing technology to their advantage. The current McDonald’s website lets a user select any combination of menu items, place the items in the online bag, and conduct a nutritional analysis on their selections. The user can break down the analysis even further than a menu item, down individual condiments, including ketchup; pickles etc. Not only has the company introduced many steps to ensure nutrition, but it will strive to continue the trend toward nutrition. McDonald’s plans to add additional healthy menu options increase nutrition awareness among McDonald’s employees; conceive new ways to deliver nutrition information to its customers, and other actions.
  59. 59. RESEARCH METHODOLOGY Research objective The objective of this study is to answer the main question: what kinds of business strategies are effecting McDonald’s in Bangalore market? The research should consequently make the company to be able to reach a conclusion on: McDonald's business strategy in the Bangalore market If the international fast food industries want to enter into the fast-food market, what kind of the market strategy should be used? Research methodology In this thesis, the researcher has used qualitative research method and also some theories to analyze what kinds of reasons led to the difference. The theoretical part includes information gathered from literature and Internet dealing with business strategy. The large amounts of necessary data and information were collected from the Internet. This thesis will describe the current development of McDonald's in India, and also use theories and realities to explain the reasons for their performances in India. On one hand, researcher will analyze the strategies of company from the perspective of business strategy; on the other hand, the researcher will analyze reasons from the perspective of competition strategy. In addition, the research contains personal interviews. There were a lot of participants' observations that the managers and customers in the Indian market know the goal of our research. For our questionnaires, the researcher only asked them at most 10 questions.
  60. 60. However, the study included primary and secondary data. The primary data was collected with qualitative methods by interviewing the customers and managers. The secondary data was from books, Internet, and course materials with some relevant information. Qualitative findings The thesis used qualitative method to do the research. In addition, the researcher has also interviewed the customers and managers to get their relevant feedback. As to the definition of qualitative research, this part of this thesis will employ Creswell’s definition as follows: Qualitative research is an inquiry process of understanding based on distinct methodological traditions of inquiry that explore a social or human problem. The researcher builds a complex, holistic picture, analyses words, reports detailed views of informants, and conducts the study in a natural setting. (Creswell, 1994) Through qualitative analysis, researcher found that there are several reasons that lead to the different performance of McDonald’s. 1. The difference of marketing positioning: you will see the different service mode. McDonald’s used QSCV mode that includes quality, services, cleanliness and value. 2. The difference of marketing strategies: McDonald’s provides a lively young dining environment.
  61. 61. 3. The difference of employee’s management: McDonald’s would like to use diversification mode to manage their employees. THESIS ANALYSIS METHODS Interview findings Interviews were started very successful. They will be found at Appendix 1 and 2. Interview with managers In order to understand the real performance of McDonald’s in Bangalore, researcher made the two interviews with 10 managers of McDonald’s outlet in Rajajinagar and Vijaynagar in Bangalore, India. Face-to-face meeting made the interviews. Because of the limit time, researcher only asked them two questions, which took totally 15 minutes. The manager interview questionnaire can be found in Appendix 2. • Manager of McDonald’s: In recent years, McDonald's began working with some local meat production and processing companies. McDonald's also made development of healthy fast food to customers. McDonald's is planning to increase its investment in Bangalore in the future which mainly for new restaurants and existing restaurant upgrades and extensions. They were satisfied with their performances in Bangalore, and in the future all of them want to occupy much more fast food market in Bangalore. They will still using localization strategy for Indian market. Interview with customers
  62. 62. According to the requirements of thesis, the researcher did the customers questionnaire in Bangalore, India which contain 100 respondents. Investigation of population can be divided into three categories which include old people, young people and children. The research was set at city center of Bangalore. Customer questionnaire will be put in Appendix 1. • Old people: They prefer KFC to McDonald’s. Compared with McDonald’s, KFC provides Indian breakfast and Indian day meal. To the old people, they love Indian style fast food much more that typical East fast food. • Young people: They like McDonald’s, because McDonald's provides delicious coffee, and free network services. And in addition, McDonald's also sell perennial student discount card. • Children: They love KFC. Children think that McDonald’s toys are more fun. The fast food of KFC is spicier for child. Through interviews, the researchers found that most old people choose KFC restaurant because of their good services and patient attitude.
  63. 63. DATA PRESENTATION AND INTERPRETATION 1. Overall response of Consumers and Employees. S.NO OPINION 1. 2. 3. SATISFIED CONFUSED UNSATISFIED TOTAL NO. OF RESPONDENTS CONSUMERS EMPLOYEES 40 60 30 35 30 05 100 100 % OF RESPONDENTS CONSUMERS EMPLOYEES 40% 60% 30% 35% 30% 05% 100 100 70 60 60 50 40 40 35 30 30 Consumers 30 20 10 5 0 Satisfied Confused Unsatisfied Interpretation: According to the response received the consumers it shows that a class of 60% individuals are either confused or unsatisfied which means that large group is there who are not happy with the services provided as compared to satisfied group. Employers on the other hand are happy with the service offered by the McDonald’s. But McDonald’s needs to revise overall marketing as well as servicing strategies so as to boost sales and a class of happy consumers. Employees
  64. 64. 2. Have you ever been to McDonald's? S.NO 1. 2. OPINION Yes No TOTAL 100 NO. OF RESPONDENTS 95 05 100 % OF RESPONSE 95% 05% 100% 95 90 80 70 60 50 Consumers 40 30 20 5 10 0 Yes No Interpretation: Most of the people have been to McDonald’s so the response comes out to be 95%.
  65. 65. 3. When you hear the word 'burger', does McDonald’s come in your mind? S.NO 1. OPINION YES NO. OF RESPONDENTS 80 % OF RESPONSE 80% 90 80 80 70 60 50 40 Consumers 30 20 15 10 5 0 Yes 2. 3. NO SOMETIMES TOTAL No 05 15 100 Sometimes 05% 15% 100% Interpretation: 80% customers are well aware about the products which show an effective product awareness of McDonald’s. On the other hand 15% individuals are confused on the same part. Overall, the response is satisfactory.
  66. 66. 4. Do you think McDonald's need to revise their menu? S.NO OPINION 1. 2. 3. Yes No Maybe TOTAL NO. OF RESPONDENTS CONSUMERS EMPLOYEES 30 60 30 20 40 20 100 100 % OF RESPONDENTS CONSUMERS EMPLOYEES 30% 60% 30% 20% 40% 20% 100 100 70 60 60 50 40 40 30 30 Consumer 30 20 20 Employees 20 10 0 Yes No Maybe Interpretation: Everybody strongly feels and would recommend revising their menu and introducing some new and different Indian flavours and products.
  67. 67. 4. What restricts from eating at McDonald’s? S.NO OPINION NO. OF RESPONDENTS CONSUMERS EMPLOYEES Unavailability of 35 40 seat Congested 35 40 High price 25 0 Location 05 20 TOTAL 100 100 1. 2. 3. 4. % OF RESPONDENTS CONSUMERS EMPLOYEES 35% 40% 35% 25% 05% 100 45 40 40 40 35 35 35 30 25 25 20 20 Consumer Employees 15 10 5 5 0 0 Unavailability of seat Conjested High price Location Interpretation: Both the customers and employers feel that McDonalds need to redecorate the available space and make it more spacious and comfortable. 40% 00% 20% 100
  68. 68. 5. What is the distance of the nearest McDonald's from your place? 80 70 70 60 50 40 Consumers 30 20 20 10 10 0 Near S.NO 1. 2. 3. OPINION Near Far Very far TOTAL Far Very far NO. OF RESPONDENTS 70 20 10 100 % OF RESPONSE 70% 20% 10% 100% Interpretation: The response was good and satisfactory that it has reached the masses and a very few % of people are away from the services of McDonald’s.
  69. 69. 6. List the Marketing strategies used by McDonald’s. 9% 10% Advertising Postering 23% S.NO 1. 2. 3. 4. OPINION Advertising Posturing Standees Pamphlets TOTAL 58% NO. OF RESPONDENTS 58 23 10 09 100 Standies Pamplets % OF RESPONSE 58% 23% 10% 09% 100% Interpretation: Most of the marketing about the menu or any new introduction in the service is done by advertising. Very few strategies like the standees and pamphlets’ are used.
  70. 70. 7. Does McDonald's have enough promotions in Bangalore? 70 60 60 50 40 40 Consumers 30 20 10 0 No S.NO 1. 2. OPINION No Yes TOTAL Yes NO. OF RESPONDENTS 40 60 100 % OF RESPONSE 40% 60% 100% Interpretation: A very proportionate answer was received by the customers.
  71. 71. 8. Do you think that introduction of happy price menu has boosted the sales up? 6 5 5 4 3 Consumers 2 1 1 0 0 Yes S.NO OPINION 1. 2. 3. Yes No Up to some extent Cannot comment TOTAL 4. 0 No Up to some extent Cannot comment NO. OF RESPONDENTS 83 00 17 % OF RESPONSE 83% 00% 17% 00 00% 100 100% Interpretation: Introduction of the happy price menu surely increased the sales. So, this should be taken as a stimulus and more varied changes in the menu should be incorporated.
  72. 72. 10. Who do you think is the biggest competitor for McDonald's? 60 56 50 40 30 Consumers 26 20 18 10 0 KFC S.NO OPINION 1. 2. 3. KFC Pizza hut Dominos TOTAL Pizzahut Dominos NO. OF RESPONDENTS 56 18 26 100 % OF RESPONSE 56% 18% 26% 100% Interpretation: 56% customers feel that the biggest competitor for McDonald’s is KFC because of their personal experience and the other factors like variety, ambience, menu etc
  73. 73. CUSTOMER PERCEPTION AND CUSTOMER EXPECTATION Customer perception is a key factor affecting a product’s success. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customer’s minds. McDonald’s being an internationally renowned brand brings with it certain expectations for the customers. Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects their values. The customer’s expect the brand to enhance their self-image. Customer responses obtained at the Cunningham road outlet confirmed the fact that they connect strongly with the brand. However, fulfilling some of the customer expectations like a broader product variety provide McDonald’s a great scope for improvement. FULL FILLING CUSTOMERS EXPECTATION Another greatest strength of McDonald’s is its product value. To fulfil customers expectation when they walk in their franchise becomes their strongest marketing element.  INNOVATION McDonald’s keeps on bringing innovation with quality in its products. People get used to of experiencing new taste and variety. 1. OVER EXPOSURE People of India always want something new or that is different from others. But in McDonald’s scenario, you can find its outlets everywhere in big cities of India. This over exposure may become boring for certain class of people in
  74. 74. India. This over exposure induce customer to move onto something new which is not as crowdie as McDonald’s. McDonald’s has lost the element of uniqueness by opening so much franchise. 2. CUSTOMER TRENDS Customer trends changes rapidly. When customer sees no further advancement or innovation in company’s product they move on to some other brand. 3. EXTERNAL ENVIRONMENT Threats and opportunities prevail in any company’s external environment: Technology: Technology works as a benchmark for organization success. Politics: Politics plays vital role in effecting organization repute. Law: Every organization need to work under state regulation, no one can work beyond the legal boundaries of business limited by state legal authority. GOALS McDonald’s needed to develop a worldwide enterprise system to reach all “McFamily” audiences including employees, franchises, suppliers and business partners. They also required improved publishing efficiencies through consistent global content management processes. This included the deployment of multiple sites with localized content using minimal resources. A system with extensive brand management and graphics capabilities was also needed to ensure consistent messaging and branding for all possible
  75. 75. audiences. The solution also needed the flexibility to adapt to McDonald’s many future online plans. MCDONALD’S EXPERIENCE Marketing in a services industry is becoming an increasingly complex challenge. The paradigms of service marketing demand a passionate understanding of customer expectations and perceptions, and linking them to product design & delivery as well as operational planning. This is where McDonald’s has excelled due to its ability to successfully integrate the customer’s perspective in its products and operations in a comprehensive manner. The revamped menu bin India is an example of McDonald’s strategy of integrating the customer’s perspective in its products. And, the operational integration is clear from McDonald’s emphasis on its suppliers as its customers as well as its treatment of its consumers as co-producers of services. The ultimate aim of service marketing is not just to become a service leader but to create a service brand. The service delivery process is the key to achieving this aim of service marketing. During the service delivery process the interaction between the firm and the customer, called as “Moment of truth”, helps understand the opportunities that a firm has to win or lose the customer. For example these “moment of truth” are created for McDonald’s every time the guard at the McDonald’s outlet meets the customer, every time an attendant takes down the order from the customer waiting in the queue, every time the cashier interacts with the customer, every time the attendant helps the customer guided the customer towards the table, every time the attendant cleans the table etc.
  76. 76. Fig 20: “Moment of Truth” – The Service Encounter Managing these “Moment of truth” is a great challenge in service marketing especially due to customer’s involvement as a co-producer of services e.g. McDonald’s self-service concept wherein the customer not only collects the order but also cleans the table after consuming the food. However, McDonald’s has been able to create a great experience for its customers by understanding the nature of the entire service delivery process and the various stages in the process that are exposed to the customers. Transparency in the processes at its outlet has helped McDonald’s bring the back office in its outlet at the front so that the customer is able to know the operations and provide feedback on service design improvements. Internal customer focus is equally important as external customer orientation in order to win these “moments of truth”. McDonald’s focus on its people and their service delivery methods therefore plays a very important role in creating a successful service brand. The quality and the consistency of the service delivered by McDonald’s have been greatly enhanced by the combination of the factors mentioned above. This has helped McDonald’s
  77. 77. become service leader and a successful service brand. This is evident from the fact that very few of its customers opt for take-home parcels or home deliveries while most of them prefer to eat at the outlet and enjoy the McDonald’s experience.
  78. 78. CONCLUSIONS AND RECOMMENDATIONS CONCLUSION Nowadays almost every person in the world for one reason or another knows about McDonald’s. But as every leading company it has to deal with and manage a big amount of external and internal issues in order to maintain itself as the top food joint in the world. After outlining the key issues McDonald’s currently faces, an analysis was conducted. Furthermore, different possible alternatives of how the company could solve its burning issues were identified, based on a structured and analytical framework – the McDonald’s marketing strategies and their effectivity. Following this approach McDonald’s needs to make some changes to its overall business model, its product range as well as its marketing strategy. The final recommendation given was to introduce some new strategies regarding marketing of the whole McDonald’ Main findings In Indian market, McDonald's made continuous development and achieved great success. However, on the contrary to the performances in the global market, it surpasses other food joints in terms of speed, quality, performance and reputation. 1) Have a deeper localized product. 2) There are small gaps in target market positioning. 3) McDonald's pays a lot of attention to brand building localization. 4) McDonald's develops localized high-level management personnel in order to make better company's strategic adjustment. McDonald's personnel diversification is reflected in employing senior staff from the head office.
  79. 79. 5) In supplier management, McDonald's independent spirit is integrated into the culture of the Indian people way of doing business, reflecting the "love and loyalty" in Indian culture. Accompanied by different other moderate changes, the radical change of introducing a new marketing strategy will help McDonald’s to further grow in the India and overseas while effectively fighting competitors. Because McDonald's has taken much of the hard work out of stock management, Restaurant Managers are able to spend more time focusing on delivering McDonald's high standards of Quality, Service and Cleanliness. Customers are happy because they can be sure the item they want is on the menu that day. Efficient marketing management is essential to any business. It enables the business to operate in a responsible way. The strategies also encourage efficient use of materials means that society's resources are being used well with very few waste products. For example, fewer materials end up as waste in landfill sites. This leads to a reduction in costs. Due to lower costs, McDonald's can pass the benefits on to customers, providing better service and lower prices. The reduction of waste provides a win/win/win situation for McDonald's, its customers and wider society.
  80. 80. RECOMMENDATION FOR MCDONALD'S Through a comparative study of McDonald's development in India focused on business and competitive strategy, researcher would like to have some suggestions for fast food restaurant if they desire to expand their business in Bangalore market. Business strategy: 1. Running more outlets is main way at this stage. 2. The franchise chain will be an inevitable road to business expansion. Competitive strategy: 1. Providing featured service and health products. 2. Achieving standardization in each process and areas of service. 3. Establishing a brand image that penetrates into the essence of every detail. 4. Setting target market with clear personalized positioning. 5. Maintain consistency in the taste and quality of products. 6. Include more items in its product line like pizzas. 7. Include more promotional and advertising techniques to increase the sales.
  81. 81. BIBLIOGRAPHY BOOKS John F. Love ., (1988). McDonald’s : Behind the arches. UK: Transworld Publishers Ltd. Barnes, D., (2008). Operations Management: An International Perspective. UK: Cengage Learning EMEA. Cooper, R.G., Edgett, S.J. (2009). Product Innovation and Technology Strategy. USA: Stage-Gate International. Facella, P., Genn, A. (2008) Everything I know about business I learned at McDonald's: the 7 leadership principles that drive break out success, USA, McGraw-Hill Harris, P. S., (2009) None of us is as good as all of us: how McDonald's prospers by embracing inclusion and diversity, John Wiley and Sons Heig, M., (2003) Brand Failures, Kogan Page Ltd, pp. 30 Plummer Joseph T., The concept and application of life style segmentation, Journal of marketing, January 1974,p.33 Jeanett Jean-Pierre and Hennessey David, Global Marketing Strategies, Biztantra and Houghton Miffin, 2005, page 164
  82. 82. JOURNAL AND PERIODICALS “Advertising does help in building brand recall, but advertising alone does not sustain a brand", Brand Speak (2004) The Wisdom of Local Sourcing, http://www.mcdonaldsindia.com/locsour.htm and Pooja Kothari, “Brand-Equity- Shaking it Up at McDonald’s”, The Economic Times, October 13, 2004.
  83. 83. WEBSITE Sharan S Lakshmanan (13th Dec, 2004) ‘McDonald's In Bangalore Will Use Licensee Route For The First Time In India’ Available[online] http://hospitality.financialexpress.com/20041213/foodbeverage04.shtml Chaturvedi, P., (no date) How McDonald's evolved its marketing in India Available [online] http://ipm.ge/article/How%20McDonald's%20evolved%20its%20marketing% 20in%20India_ENG.pdf (Accessed: April 2, 2012) Indian Mirror (no date) Hinduism Available [online] http://www.indianmirror.com/religions/reli1.html (Accessed: April 2, 2012) Mathur, S., (2011) McDonald's Spices Up Products for Indian Vegetarians Available [online] http://www.buddingmarkets.com/?p=39 (Accessed: April 3, 2012) Nation's Restaurant News (2011) McDonald's: Lesson learned from India Available [online] http://nrn.com/article/mcdonald’s-lessons-learned-india (Accessed: April 3, 2012)
  84. 84. APPENDIX ANNEXURE-1 For customers only. QUESTIONNAIRE-1 Dear Respondent, I would be grateful if you could spare some of your time to respond to the following questions. Your response will be treated as confidential and would only be used for completion of my research work in partial completion of my M.Sc in Hospitality Administration. 1. Do you know that McDonald’s is the largest fast food chain in the world? Yes No 2. When you hear the word ‘burger’ does, McDonald’s come in your Mind? Yes No Sometimes 3. Have you ever been to McDonald’s? Yes No Don’t remember 4. With the introduction of new Happy Meal price menu has your number of visits increased? Yes No Doesn’t matter
  85. 85. 5. How do you rate the service in McDonald’s? Very good Good Average Bad 6. Do you think McDonald’s need to revise their menu? Yes No Maybe 7. What is the distance of the nearest McDonald’s from your place? Near Far Very far 8. What restricts you from eating at Mc Donald’s? Unavailability of seat Conjusted High price Location 9. How often do you visit McDonald’s? Daily Weekly Monthly 10. Which fast food joint do you prefer to take your family to? McDonald’s KFC Pizza hut Dominos
  86. 86. Why? _______________________________________________ 11. What do you think McDonald’s serves best? ____________________________________________________ 12. What do you think McDonald’s needs to improve on? Name & Age: ______________________________Email ID: Occupation: __________________________Contact no: ____________ Signature: _________________________ Business card (if any)
  87. 87. ANNEXURE-2 For employees only QUESTIONNAIRE-2 Dear Respondent, I would be grateful if you could spare some of your time to respond to the following questions. Your response will be treated as confidential and would only be used for completion of my research work in partial completion of my M.Sc in Hospitality Administration. 1. List marketing strategies used by McDonald’s? 1._________________________________ 2._________________________________ 3._________________________________ 4._________________________________ 2. Does McDonald have enough promotions in Bangalore? No Yes 3. Do you think that introduction of happy price menu has boosted the sales up? Yes No Up to some extent Cannot comment 4. Do you think McDonald’s need to revise their menu? Yes No
  88. 88. Maybe 5. Who do you think is the biggest competitor for McDonald’s? KFC Pizza hut Dominos 6. What restricts the customers from eating at Mc Donald’s? Unavailability of seat Congested High price Location 7. Do McDonald’s provide enough training to employees? Yes No Cannot comment 8. What are the different props used by McDonald’s in order to attract customers and market the products?  ________________  ________________  ________________  ________________ 9. What according to you may increase the sales at McDonald’s? _______________________________________________________________ ______________________________________________________________
  89. 89. Name & Age: _______________________Email ID: _______________ Occupation: ______________________Contact no: ________________ Signature: _________________________ Business card (if any)