Marketing Strategies of Mcdonalds in India

EXECUTIVE SUMMARY Marketing is a procedure of attracting prospective customers and consumers in your products and services. However the crucial word in the above sentence is â€Å"procedure â€Å", hence marketing incorporates researching, advertising, selling, and distributing your products or services. Hence we planned to focus on one of the best known brands worldwide, McDonald’s Corporation. The following executive summary presents the key marketing aspects of McDonald’s Corporation and should be read as a complement to the contents of this report. Summarized content Page No. †¢ Key facts about the firm. External environment forces and consumer behaviour. †¢ The concept of Marketing mix and its various aspects. †¢ Decision making process and brand image. 2 2 3 †¢ The Product Life cycle and what steps the company is taking to revitalise its existing products. †¢ The different communication strategies used by the company in advertising its p roducts and the varying styles of television advertising carried out since McDonald’s launch in India. †¢ The distribution and the supply chain network of the firm in India. †¢ The SWOT analysis of the firm along with inference and some recommendations. 8 9 10 1. 0 INTRODUCTION Marketing is understood by majority of business groups as simply to mean simply to promote, sell and advertise. But this is not entirely true as marketing incorporates all techniques from human behaviour and cultures through research, new product launch, product life cycle, advertising, public relations and finally the sales function. The Chartered Institute of Marketing (CIM) describes marketing as ‘the management method accountable for discovering, anticipating, and satisfying consumer requirement valuably. ’ Hence the most significant concept of marketing lies in knowing and understanding your customer. This report aims at investigating how McDonald’s Corporation, a global restaurant has achieved this enormous success in international growth and challenges due to its marketing strategies. 2. 0 BACKGROUND AND DISCUSSION Out of the enormous market of fast food industry, McDonald's Corporation is the globe's fastest growing firm, with more than 20,000 restaurants in 100 countries (Vignali, 2001). In the UK, McDonald's operates a staggering 900 restaurants (www. bc. co. uk ). Initially it was started as a hot dog stand by Dick and Mac McDonald at California, USA in 1937. The business began in 1955 when Ray Kroc and the McDonald’s brothers opened a restaurant to the north of Chicago. From then on, McDonald's grew rapidly and today is known as an international brand. However, the cuisine menu has been changed to meet the demand and lifestyles of the customers. India has been a di fficult market for any overseas firm to do business considering its diversity and cultural differences. However McDonald’s established its first Indian outlet in Vasant Vihar, New Delhi in October 1996. McDonald's India has a 50-50 joint venture involving McDonald's Corporation, US and 2 Indian business men, Amit Jatia’s (Hard castle Restaurants Private Limited) and Vikram Bakshi (Connaught Plaza Restaurants Private Limited). About major percent of the menu available in McDonald’s in India is Indianized and exclusively designed to attract Indian consumers (Dash, 2005). But the success have not come at ease, the firm had to meet a lot of obstacles and problems in attaining its high standards. . 0 EXTERNAL MARKETING ENVIRONMENTAL FORCES McDonald’s faces many external marketing environmental forces, which the firm has to familiarize with and deal accordingly. With respect to environment forces, the firm has to adapt highly fragmented foodstuff marketplace and developing transportation. Considering the fact that India’s food expenditure is on the rise, Mc Donald’s also has to compete with the millions of road side stalls, dhabas (Regional Food Stalls) and carts which offer popular foodstuffs across India (Dash, 2005). Hence the company has come up with a variety of reasonable products at reasonable prices. In view of the cultural force, the firm has to conquer the major regional languages and the educational barrier among the people. Hence McDonald’s adapts to the local language and uses signs as a strong display of firm’s assurance to the localities (Chauhan, 2008). On the political front, the firm also has to check on the government intervention and pressure from various regional environmentalists and health camps (check http://www. hinduonnet. com ). Even on the economical front, some pressure exists as swadeshi (regional) mindset exists. The company also has to focus on the diverse distribution of income across the country. According to Mr Jatia, M. D, South and West Region, India, Indian people are increasing their visits to McDonald's as it has become more than an occasion meal especially to the middle class. (http://online. wsj. com ). Hence looking at the success, the fact can be drawn that both local management directors (Mr. Bakshi and Mr. Jatia) have played important roles in shaping McDonald’s to the prospects of the Indian market. . 0 MARKETING MIX The concept of Marketing Mix consisting of the 4P’ was formulated by McCarthy in 1975. This was used as principal foundation for many years. In the year 1996 Fifield and Gilligan added 3P’s (People, Process and Physical) to the existing 4P’s of Marketing Mix. These 3P’s are an integral part of services marketing. The 7P’s used to anal yse the Marketing Mix of McDonalds in India are: 1) Product (Features, Quality, Quantity): McDonalds aims to create standardized set of items, that taste same everywhere. But along with this it concentrates on localization by adapting to local tastes, customs, customer preferences etc. For example, McDonalds changed the ingredients of its ‘French Fries’ after it protested that it was made out of the oil from beef. This was done as Cow is considered sacred among Hindus in India. McDonalds has a variety of products specially made for the Indian market. Some of them are Vegetable McNuggets, Mutton based Maharaja Mac (as Hindus do not eat beef and Muslims do not eat pork). Apart from all these its menu includes beverages, frozen desserts and breakfasts combos. ) Place (Location, Number of Outlets): McDonalds follows concept of standardization in component of place also. The ambience and outlook all restaurants are the same. The reasons why most of its outlets in India are in Malls, shopping complexes, famous street markets is its locating strategies. It has over 130 outlets in 34 cities all over India. 3) Price (Strategy, Determinants, Levels ): In India McDonalds has set prices on the basis of the prices of its nearest organized competitors. For example, initially it set price in New Delhi on the basis of the price of Nirula’s, its biggest competitor in that area. Vignali, 2001) This way it attracted the customers, as they were getting an international brand at the price of a local brand. The pricing strategy of McDonalds with respect to competition is explained in the later stages of the report. 4) Promotion (Advertising, Sales Promotion, Public Relation): â€Å"Brand globally, advertise locally† is McDonald’s promotion strategy. (Vignali, 2001; Sander & Shani, 1991). For years it has maintained extensive promotion strategy. It focuses on children, overall eating experience and portrays itself as a ‘Family Restaurant’. Its global tag line is â€Å"I’m Lovin’ It†. Tag line to attract Indian customers is â€Å"Aap Ke Zamaane Mein Baap Ke Zamaane Ke Daam†, which means buy at a price, which your father used to buy in his days† 5) People (Quantity, Quality, Training, and Promotion): â€Å"The Company is strongly committed to staffing locally and promoting from within. This means that McDonald’s has managers who understand both the corporate and the local cultures† (Vignali, 2001). Particularly in India it is important to have local people, as language differs from state to state and staff from some other state might not be able to understand the local people’s language. ) Process (Blueprinting, Automation, Control Procedures): In McDonalds the procedure for making food is identical everywhere. For example, one out of two fries must measure 75mm, meat for Big Mac’s weighs 45g and is 20 per cent fat. (Vignali, 2001). The following is the process in McDonalds: 7) Physical (Cleanliness, Decor, and Ambience of t he Service): This is one of the most important components of the Marketing Mix. If the place where the food is served is not clean and hygienic then there will be no result from the components. Keeping this in mind, McDonalds aims at cleanliness, speed, quality and transparency of process. Strict standards of cleanliness are maintained at all times. 5. 0 CONSUMER BEHAVIOUR In terms of consumer behaviour, McDonald’s associates its products with routine response behaviour and in some cases limited decision making for some classes. For example, enjoying a happy meal for some people may just be a case of hunger while some for some eating at McDonald's may be luxury and hence they may only turn up on occasions. Majority of the decision starts with experimental buying. Personal factors which affect the firm in relation to the consumer are demographic factors like age, gender and race. However the firm can also produce some situational factors like offering free sport coupons and offering 2 meals at one price (Deng, 2009). McDonald's also enhances the individual level of involvement by offering healthy meal packages for adults and toys for children. Bearing in mind the social factors, the firm has understood various cultures and classes across India. As different people have different local tastes, the firm produces products with a mix of regional taste (Dash, 2005). In terms of opinion leaders, celebrities are being increasingly used in marketing communication by marketers to lend personality to their products. 5. 1 UNDERSTANDING THE INDIAN CONSUMER Understanding an Indian consumer was extremely important for overcoming the challenges of expansion in India. Some facts of Indian consumer are that they have a high degree of family orientation. In solution to this? In India, McDonald’s has placed itself as a family restaurant. The foundation of its approach is to attract families and friends (Dash, 2005). Secondly Indian consumer is influenced by discounts and freebies. Hence the firm has constantly distributed free schemes on its products with its pricing strategies. Notable fact is that Indian consumers choose expensive products as they feel that price is an indicator of quality and they are likely to buy environmentally responsible products and packs as the environmental awareness has started affecting India. In response to this McDonald's attracts the consumers with good quality products and its ethical and ecological responsible products and packaging help in clean environment. . 2 DECISION MAKING PROCESS After investigating the behaviour of Indian Consumer, McDonald’s has produced an effective decision making process which involves five stages. The firm initially tries to recognize the desired need of the customer with its research on regional consumers. Secondly McDonald’s provides information of the products through internet, reports, media and campaigns which he lps the buyer to differentiate and understand the product better. Information related to pricing, offers and health are provided to the consumer. Thirdly McDonald’s provides a range of alternative products and its benefits to different consumers and helps them to evaluate accordingly. In the fourth stage the company uses its price strategy and benefits; the company aims to attract customers and their decisions to purchase their products. And finally, through quality and service, McDonald’s tries to improve its service with customers providing Post-purchase evaluation. 6. 0 BRANDING In terms of brand experience, McDonald’s is not just a product but a fast, clean and easy way for families to enjoy together. In view of the firm’s branding, McDonald's emphasizes on Customer driven and goal oriented techniques. According to Arvind Singhal, Head of Marketing at McDonald's India, McDonald's chooses to familiarize the customer with the brand in terms of a marketing communications. Since the brand image symbolizes how customers view the organisation, the company launched a clown named Ronald. Sitting on the Ronald McDonald bench and pumping sauce from the sauce machine became brand rituals for children. Hence the company ensured that it as to be aware of fundamental needs by identifying, predicting and serving their consumers rather than just selling the product (http://www. businessweek. com ). Hence the firm concentrates not only on delivering products for the instant demand but also defending the long term brand status. Family values being important in India, McDonald’s promotion assured that it’s is not just a fast-food joint but a quick, healthy and easy way for famil ies to relish together. Thus McDonald's focuses not only on delivering sales for the immediate present but also protecting the long term brand reputation. . 0 COMPETITION AND RECESSION In terms of pricing strategies, which is a part of marketing, McDonald’s faces tough competition on several fronts. Traditional rivals such as Pizza Hut, KFC and most importantly the local dhabas and road side stalls are eating reasonable margins of McDonald’s sales. Considering the prices, a happy meal in Pizza Hut which consists of 2 pizzas would approximately cost ? 4. 5 (Rs 350) and similarly a burger and drink at a KFC outlet would cost around ? 1. 5 (Rs 120). But with its consumer value strategies, McDonald’s offers a happy meal at only (Rs 90) ? 1. 12 (www. businessworld. in ) Recession may affect organisations to change their marketing policies because as recession occurs, the consumer spends less money on the product or switches to alternatives of low cost. But recession seems to be an advantage for McDonald’s as Consumers will cut back on high-end dining, and McDonald's is the beneficiary as they provide food at reasonable prices. (www. europe. wsj. com ). The company also introduces new offers accordingly to the situation. McDonald's has benefiting from its worldwide existence during the present recession, by the launch of new products like McAloo Tikki (prepared with potato and vegetables) and the Maharaja Mac in India (http://money. cnn. com/2009 ). According to Vikram Bakshi, M. D of McDonald's operations in India, McDonald's will be doubling-up its returns in three years, and tripling our restaurants in the next five years. Currently the fast-food chain has 123 outlets in India (http://in. reuters. com ). 8. 0 PRODUCT LIFE CYCLE Underpinning the product life cycle concept is the belief that products move through a sequential, predetermined pattern of development similar to the biological path that life forms follow. This pathway is known as the Product Life Cycle (PLC)† (Baines et al. , 2008). According to Kotler & Keller (2009), a company’s positioning and differentiation strategy must change as the product, market and the competitors change over its PLC. [pic] Figure 1 As it can be s een from the above figure a product basically has five stages, with four of them directly related to the consumers who in many terms dictate different aspects or the whole of product. Thus all products have a limited life for the consumer as well as the product. Since McDonald’s is a company that deals in food items, its products will have a definitive period within which they have to get acquainted to the customers tastes, grow in value and earn profits for the company. Also since the McDonald’s products are perishable they have a short life cycle (see www. bbc. co. uk). Thus regular innovation of the food items is required by McDonald’s. For instance, McDonald’s French Fries have been an important part of the company’s menu worldwide. But in India, at one stage their sales were on decline. To counter this problem the management tried to implement certain steps. They introduced the fries with a mix of certain Indian spices. The product came to be known as Shake Shake Fries. This was well received by the consumers and it once again revitalised the sales of the fries. Thus without cannibalising the existing product a new product was created by the firm to delay the decline of a well established product which had the potential to generate income (Ghosh et al. , 2009). 9. 0 MARKETING COMMUNICATIONS The managerial system that ensures timely and comprehensive input to the corporate information and the decision making process and consequence production and expression of credible, persuasive representations of beneficial exchange opportunities with actual and prospective customers and other stake holders. (Varey, 2002). On a more a simple terms it is the method of communicating the right message, through the right medium, to the correct audience (see www. thetimes. biz). If a firm fails to comprehend these steps, it may result in its product failure. The communication methods adopted by McDonald’s in India are as follows, Newspapers, Journals and other forms of Print Media †¢ Television advertisements †¢ Point of Sale Display †¢ Merchandising †¢ Direct Mail †¢ Door drops †¢ Demonstrations †¢ Tele-Marketing(see www. thetimes. biz) Thus effective communication is, when the company develops a campaign which makes use of the above methods to ge t the desired results. Considering only the Television Advertisements of McDonald’s in India, these were not on the company’s radar until the turn of the century (see www. thetimes. biz). This was despite its entry into the Indian market in the latter part of 1996. This step was undertaken by the company so that it could concentrate more on the development of its stores, improve the quality of its products and tailor its global menu to suit the Indian tastes. It was only after 2000 that the first advert of the firm was telecast. â€Å"The first advert of the firm 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. † This advert of the company basically focussed on McDonald’s being a comfortable and a familiar place (Chaturvedi, 2008). The next ad was based on a family moving to a new place. The kid in the family feels lonely in the new surroundings until he finds a McDonald’s. This ad was basically the friendliness of the McDonald’s personnel. Also the management of the firm in India noted that the local people were price sensitive. Thus they took out and ad with a tag of ‘Yesteryear’s Prices’. â€Å"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† (Chaturvedi, 2008). Thus McDonald’s with a clear agenda timed their ads to perfection which gave them good returns. McDonald’s also with its advertisements gave its tagline utmost importance. This is evident from the fact that its initial ads were delivered with a punch line â€Å"McDonald’s Mein Hai Kuch Baat† which translates to ‘There is something special in McDonald’s’. When McDonald’s had been successfully established, its tagline changed to â€Å"To Aaj McDonald’s Ho Jaye† which means ‘Why not celebrate with McDonald’s today†¦Ã¢â‚¬â„¢ (Vikram Bakshi, MD, McDonald’s India). He also adds that the main focus of the company with its advertisements was to change the perception of the Indians that McDonald’s was an ‘American brand with typical American values’. As Arvind Singhal, Head of Marketing at McDonald's India says â€Å"From a marketing communications standpoint, we chose to focus on familiarizing the customer with the brand. † Presently all of the McDonald’s communication strategies are focused to move the consumers to some kind of action. This may either be to visit the restaurant, buy the product or recommend it to a friend. It is also framed so that the consumers remember the product. Thus the mantra of the firm is that the more it knows about the people it is serving the more it will be able to communicate messages that appeal to them. 0. 0 DISTRUBUTION AND SUPPLY CHAIN McDonald’s uses an outsourcing model al all its markets, in some places it actively imports but in India gets materials from different places in India (Dash, 2005) it has suppliers all over India, supplying different inputs. This is done on order to procure best quality of input at the best possible price. Selecting a supplier involves a fou r step process. In each step the prospective supplier is evaluated carefully. Only item imported is the equipment to dish out burgers. The major suppliers in India are: Input Product |Supplier Company |Location | |Iceburg Lettuce |Trikaya Agriculture |Talegacon(Maharashtra) | | |Ooty Farms |Ooty | | |Meena Argitech |Delhi | |Cheese |Dynamix Dairy |Baramati (Maharashtra) | |Milk & Milk Products for Frozen Desserts |Amrit Food |Delhi and Mumbai | |Buns & Sauces |1)Cremica Industries |Philluar (Punjab) | | |2) Shah Bector and Sons |Khopoli ( Maharashtra) | | | | | |Patties, Pies & Pizza puffs |Vista Processed Foods |Taloja | (Dash, 2005) The entire distribution process is carried on by AFL Logistics Ltd, McDonald’s official partner in logistics and supply chain. 10. 1 DISTRIBUTION McDonalds in India uses what is called as a ‘Cold Chain’. This means that the vegetables are stored in cold storage from the moment it is harvested. These are then transported to restaurants in refrigerated vans. Semi – finished products are also stored a particular temperature. This ensures freshness and maintains the moisture level of the food. In the restaurant also the products are refrigerated. In the restaurant the deliveries are made to the customer within 60 seconds and the mode of service is self service. This is done to maintain speedy and quick service. 11. 0 SWOT ANALYSIS McDonald’s in India has been for around for around 13 years. Till now it has complimented the values and the cultures of the locals in an extremely ethical way. But still it has some weaknesses and threats, which if not countered, may well become grave. Thus the SWOT analysis shows the areas where the firm can build up on its existing strong image. ? Strengths †¢ Strong Brand – The McDonald’s Corporation in India has been able to live up to its global image of being able to handle any type of market. It has shown that by adopting the right approach and methods, any market can yield positive results. This has not only consolidated its powerful image and strong brand values but also has made the job difficult for the new entrants. Customer Intimacy – The firm in India with its correct mix of communication has been able to tap majority of the audience it focused on and has also developed affection from the large children populace of the country with its Children Centric ads. †¢ Product Innovation – the Compan y with its timely product innovation has regularly kept the consumers interested in its menu which caters to their tastes. †¢ Variety in Menu, Reasonable Prices and Great Service – Also with wide options in the menu McDonald’s also offers great prices with burgers starting from Rs20 ( Around 15p) plus with ‘1 Minute Service’ customers do not return disappointed from the place. ? Weakness †¢ Product on the scale of Health – McDonald’s in India is still not selling products which are good for health or which are made keeping consumers fitness. They are trying to fine tune their menu by adding more baked products rather than fried patties, but apart from McCurry Pan (launched 2003) it has not been able to introduce more healthy products (Dash, 2005). This fact forces many health conscious people to avoid the place altogether. ? Opportunities †¢ Expanding in Tier 2 and Tier 3 Cities – Despite the firm’s success in the urban and the metropolitan cities of India, McDonald’s has still not explored the whole of the country. This is due to the fact that the smaller cities in India are more inclined towards the home cooked food and eating fast food out is generally limited to local food joints that specialize in Indian cuisine. This presents a good prospect for the company to experiment with its menu, as McDonald’s has already localized its menu to a very great extent in the country. Entry into Breakfast Category – One of the other things that the company has still not made a complete foray into is the ‘Breakfast Menu’. McDonald’s have started only a couple of outlets in Mumbai and Delhi on experimental basis that serve Breakfast menu in December 2008. The options in this menu are available from 7 am to 11am in the morning. But the company is still to operate it on a large scale. †¢ Strong Beverage Brand – McDonald’s in India have till now only concentrated on to the food items they serve. The beverages they offer are just plain Coke available in small and large and coffee, tea and hot chocolate with no proper advertising. But it still has the opportunity to advertise and bring in its own brand of beverage as compared to something like Star Bucks’ The beverage may hot or cold and would give McDonald’s its own identity in the market which is dominated by Coke and Pepsi. ? Threats †¢ Changing Customer Lifestyle – Today, India has changed considerably as compared to 10 years back. Simultaneously the customer tastes are changing at a very fast pace. McDonald’s needs to keep this thing in mind since the customer taste for a particular product in today’s environment is very short-lived. †¢ Increased Competition – Today with the increasing number of malls and shopping centers in India, the number of fast food joints and restaurants has increased significantly that offer similar kind of food at comparable prices. This can turn out to be a disadvantage to the company since it mainly concentrates on opening its franchises in these malls. 12. 0 CONCLUSIONS & RECOMMENDATIONS From the above report it is clear that McDonald’s marketing strategies in India have been successful. With complete understanding of the consumer and considering the various marketing environments, executing very reasonable prices to timely product innovation and lastly extremely effective communication techniques have included India in their long list of successful countries. The only thing that the company needs to focus on is to try and add more menu choice and variety to promote healthier lifestyles. Also it should contemplate its already existing operations before continuing expansion in rder to increase their profit margin and since India is a developing country the firm should try and concentrate on penetrating, at timely intervals, into more budding cities. 13. 0 REFERENCES Baines, P. , Fill, C. , Page, K. (200 8) Marketing Oxford University Press, New York. Chaturvedi, P. (2008) Super-localize me: how McDonald's evolved its marketing in India, Warc Exclusive. Chauhan, G. (2008) Language in India, Languages Group, Vol 8, Birla Institute of Technology and Science, India. Deng, T. (2009) McDonald’s New Communication Strategy on Changing Attitudes and Lifestyle, International Journal Of Marketing studies, Vol 1, SolBridge International School of Business, South Korea. Fifield, P. and Gilligan, C. 1996) Strategic Marketing Management, Butterworth- Heinemann, Oxford. Ghosh, R. , Balaji, D. , Shah, J. , Sherlekar, N. , Sidana, D. , (2009) McDonald’s: Behind Golden Arches. Kotler, P. & Keller, K. L. (2009) Marketing Management, 13th Edn, Pearson Prentice Hall, USA. McCarthy. (1975) Basic Marketing: A Management Approach, Irwin, Homewood, pg – 98. Media Trust, The Institute For Volunteering Research (1997) Introduction To Marketing, Volunteering England and the Centre for Inst itutional Studies at the University of East London, UK. Prof. Dash, K. (2005) McDonald’s in India, The Garvin School of International Management, USA. Sander. D. M. & Shani. D (1991) â€Å"Brand Globally but Advertise Locally? An Empirical Investigation, International Marketing Review, Vol – 9, No – 4, pg – 18 – 29. Varey, R. J. (2002) Marketing Communication: Principles and Practice, Route ledge, London,pp 127-129. Vignali. 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