Global Marketing Strategies of McDonalds

To Prof. Sanjay.K.Jain Department of Commerce Delhi School of Economics University of Delhi

Subject: Submission of Project Report in International Marketing Management

Respected Sir, We are submitting the project report on the topic Global Marketing Strategy '' McDonald s . Our report is based on extensive research, direct interviews and secondary research.

The report shows the current marketing strategy of McDonald s and its effectiveness in the current scenario. The report focuses on the consumer s perception and their behaviour towards McDonald s through out the world.

We are extremely grateful to Prof. S.K.Jain, our teacher in charge, Mr. Vikram Bakshi, Managing Director; North zone McDonald s India, Mr. Sanjeev Katiyar, Head Marketing North zone McDonald s India and all those who cooperated with us in the completion of our project.

Thanking You Yours Faithfully Akshay Berrry (6) Anshul Sood (10) C.V.R.Shekhar (14) Deepika Mittal (15) Manish Kr. Gautam (21)

Acknowledgement

The beatitude, bliss and euphoria that accompany the successful completion of a project would be incomplete without the expression cogency fulfilling the study, indefatigable perseverance and most of all encouraging guidance and steering. So with reverence veneration and honour we acknowledge all those whose guidance and encouragement has made a successful winding up of the opus.

We, especially, extend our deep gratitude to Prof. S.K.Jain, our Marketing faculty whose invaluable guidance and support enabled us to complete the project successfully.

We are also indebted to the Management of McDonald s India for granting us the permission and all the required information along with guidance to accomplish our project.

We would like to give our special thanks to Mr. Vikram Bakshi, Managing Director McDonald s India North Zone who spared his precious time and gave us a chance to interact with him and ask him the requisite information about their strategies. We also express our sincere thanks to Mr. Sanjeev Katiyar, Head Marketing without whose support this project would not have taken its present shape.

Finally, we are thankful to all those who have helped and guided us in collecting, arranging and compiling the data required for our project.

Research Methodology

Objectives

1) Study of Global Marketing Strategies of McDonald s

2) McDonald s '' The Indian Case

3) Evaluation of overall customer satisfaction of foreign tourists in Delhi vis--vis that in their respective home countries.

[pic]

Table of Contents

S.No

Content

Page No

1. Executive Summary 2. Environmental Analysis Global Fast Food Industry Survey Findings Porters Five Forces Model '' The Fast Food Industry SLEPT Analysis 3. Company Profile McDonalds Back Ground McDonalds India McDonalds Business Model 4. Internationalize Business 5. Country Market Selection 6. Market Entry Selection 7. EPRG Approach 8. Segmentation 9. Positioning 10. Product 11. Price 12. Place 35 28 30 11 13 15 19

8 10

27

31 34

37 37 42 46 49 55 67

13. Promotion 14. People 15. Processes 16. Research Analysis 17. Conclusion 18. Recommendations 19. Bibliography 20. Annexure

80 86 88 91 102 106 107 109

[pic] At first, most people must have laughed at the idea of a chain of restaurants selling identical products all over the country, but little did they know that the genius idea that they had mocked at would go on to revolutionize the business environment of the future. McDonald s is now the international market leader for fast food, and has been ever since its pioneering first restaurant was launched in San Bernardino, California in 1948. McDonald s is one of the world's most well-known food service retailers with more than 30,000 restaurants in 121 countries serving 47 million customers each day[1]. It has a leading share in the globally branded quick service restaurant segment in virtually every country in which it does business. Changing consumer trends, a powerful driving force within the Quick Service Restaurant industry, has flamed the growth of this segment. Our group has taken up the case of McDonald s in order to study the different ways in which a company strategize and distinguishes its strategies in different countries and also try and understand the complexities involved in the differentiation and positioning strategies of the same company in different, diverse markets spread across the globe. We start with the global fast food industry trends and find out the current standing of McDonalds amidst several other competitors. For this we have adopted the Five Forces Model of Michael Porter. Then we have used the SLEPT Approach to analyze the various Social, Political, Economic, Legal and Technological factors affecting McDonalds and also how they decide as to which market to enter. With this detailed analysis of the macro environment, we try to find out how exactly has McDonalds decided upon the markets to enter and also the mode of entry. Once it has entered a particular market, we try to understand its segmentation, positioning and target market strategies vis--vis its competitors in that particular market. With this we move on to the micro environment and perform an in depth analysis of their marketing mix using the 7-P framework. This project highlights how the company combines internationalization and globalization elements according to various fast food markets. Using the effect of strategic and tactical models, the case illustrates the effect of McDonald s on the global environment and how they adapt to local communities.

This project also includes primary work done to understand the perceptions of foreign tourists about McDonalds in India as well as in their respective countries. This differentiation helped us in understanding the rationale behind the distinct marketing strategies followed by the company in diverse markets. For this purpose, we had conducted a survey of around 50 foreign tourists in Delhi at the Connaught Place outlet of McDonalds.

Towards the end, we have tried to summarize the various findings of our survey along with those of the entire research report in order to arrive at a comprehensive and holistic understanding of the global marketing strategies followed by McDonalds and thereby provide few recommendations.

Environmental

Analysis

The Global Fast Food Industry

The fast food business has become ever more competitive, with various multinational fast food chain operators expanding into new geographies daily, along with the emergence of new players, new types of cuisines and new menu choices.

Players: - McDonalds, Burger king, Subway, Wimpy, Pizza hut etc

With fast food operators introducing healthier options in the form of salads and low carb meals - in the face of growing concerns for rising obesity levels - consumers today have greater choice than ever before.

Some Recent Trends

It doesn t matter where in the world an individual is (or how well off), the fast food culture has become a way of life for all. According to the latest findings from A C Nielsen, nearly all Filipino (99%), Taiwanese and Malaysian (98%) adults eat at take-away restaurants, according to a new study from A C Nielsen, a

leading provider of consumer and marketplace information. Among the 28 markets studied across three regions, consumers in these three markets had a higher percentage of adults than Americans (97%) who eat at fast food restaurants. The latest A C Nielsen Consumer Confidence and Opinion Survey was conducted in October over the Internet in 28 countries across Asia Pacific, Europe and the US interviewing more than 14,100 consumers over the Internet.

Asians - The World s Greatest Fast Food Fans

|Top 10 Global Markets for Weekly Fast Food Consumption Population That Eats at Take-Away | | |Hong Kong |Malaysia |Philippines |Singapore |Thailand |China |India |U.S. |Australia |New Zealand

|Market Percentage of Adult

|Restaurants at Least Once a Week |61% |59% |54% |50% |44% |41% |37% |35% |30% |29% | | | | | | | | | |

Survey Findings

[pic]

[pic]

[pic]

[pic]

Porters Five Forces Model '' The Fast Food Industry

Threat of New Entrants

In the recent years Global Fast-food market has shown tremendous results and the growing demand for fast food has been attracting many players. Market is full with players like McDonald s, Wendy s, Burger King, Subway, Pizza hut, KFC, and many other local players. Few other players are also looking to extract profit from this market. Even few local players are also looking to enter into the global arena. For example Burger King is planning to enter into the Indian market. These new comers are expected to radically alter the industry structure with their technology. The reasons for upcoming of new entrants are: Market is reasonably attractive. Entry barriers are not very strong. Diversification

Therefore, the competition in the Global Fast food market is heating up. This implies that the threat posed by new entrants will be very strong.

Bargaining Power of Customers

In the Global Fast food segment the bargaining power of customer is very strong as a result many big players are working on the perceived value based pricing therefore the price level is reasonably adequate. Yet customers are price sensitive especially in the Asian countries. In the industry the alternatives are easily available as a result customers are in a position to excise much bargaining power.

The customers are always given more value for their money either in form of Happy hours or combo meal from McDonald s, Buy one get one free from Pizza Hut, or free gift from the outlets; they enjoy heavy discounts on their purchases with more value for their money.

Bargaining Power of Suppliers

In the Fast food industry the major supplier are - regional suppliers of vegetables, milk product and chicken. They excercise clout in the industry. Given McDonalds endeavour to develop exclusive supply chains in countries across the globe, the bargaining power of the suppliers is bound to grow. Since the suppliers are aware of stringent quality standards, extremely specific input requirements followed by McDonalds, they know that McDonalds cannot afford to change their suppliers too often. This absence of competition gives the suppliers an upper hand.

Rivalry among Current Players McDonald s Wendys Burger King Subway Pizza hut KFC Others (Small local players)

These players are continuously looking to expand their market share. Top five burger restaurants per market share (Source: Ad Age): |Rank |1 |2 |3 |4 |5 |Company |McDonald's |Burger King |Wendy's |Hardees |Jack in the Box |Market Share |43.1 % |21.1 % |12.7 % |5.3 % |4.4 % | | | | | |

In addition to traditional rivals Burger King, Wendy s, and Taco Bell the industry encountered new challenges. Sonic and Rally s competed using a back-to-basics approach of quickly serving up burgers, just burgers, for time-pressed consumers. On the higher end, Olive Garden and Chili s had become potent competitors in the quick service field, taking dollars away from McDonald s, which was firmly entrenched in the fast-food arena and hadn t done anything with its dinner menus to accommodate families looking for a more upscale dining experience.

Threat from Substitutes

Major threat to Global fast food industry is from regional players in unorganized segment because these small players are tapping a large share of the segment. Even local restaurant outlets are making a dent to their market share. This category has posed the major threats to the industry by providing good quality food in congenial environment at an attractive price level. It serves the purpose of both food and entertainment and at the same time they provide more value for consumer s money. Recent years have witnessed a spurt in the number of local restaurant outlets in almost every country.

Slept

Analysis

Managers do not manage in a vacuum. They operate within organizations. Organizations, in turn, operate in an environment of markets and governments. Successful managers learn to link the strengths and weaknesses of their organizations to the threats and opportunities arising in their environments. It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up from:

1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc. 2. The micro-environment e.g. our external customers, agents and distributors, suppliers, and competitors. 3. The macro-environment e.g Political (and legal) forces, Economic forces, sociocultural forces, and Technological forces. These are known as PEST Forces. McDonalds is facing problems from all areas of the PEST Forces.

Political Factors The political arena (local, national and international political developments) has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. McDonald s has to consider issues such as: 1. How stable is the political environment? 2. Will government policy influence laws that regulate or tax their business? 3. What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as European Union, North America Free Trade Association, ASEAN, or others? 7. Does there exist any kind of opposition to the activities being carried out by the firm?

The Mcdonalds Case The company is facing political forces from the nations in which the company operates. Governments of various nations are now adding legislation to force them to put health warnings on their products. They have also become a symbol of capitalism and Americanism '' meaning that they have now become the target of terrorist groups and attacks. McDonalds has no control over these political factors that are making the company suffer greatly. They can only leave war stricken countries, or places where terrorism is a threat. This means a loss in revenue, as well as a threat of becoming smaller and therefore weaker. CASE: A case in point is the economic boycott being faced by all American restaurants including McDonald s in Egypt. The Egyptians are spreading a negative propaganda against McDonalds because a percentage of the benefits being earned by the company in Egypt are going to Israel.

Whether in the public or the private sectors, managers are never far from political forces and the effects of electoral competition and ballot measures; legislative politics and statutes; bureaucratic conflict and procedures; judicial oversight and rulings; and administrative rulemaking and regulations. Individuals and firms, therefore, inevitably seek to influence public policy and the political authority of governmental organizations. When McDonlads wanted to locate a test restaurant in 2004 using HFC free refrigeration it had to take into account various factors like government policies, outlook of environmental agencies/organizations etc.

After due consideration Denmark was chosen as the ideal country in which to locate the test restaurant, since it had already started initiatives to phase out HFC refrigerants. McDonald's then started to work in close collaboration with the Danish Ministry of the Environment, the Danish Technological Institute, and four Danish companies in order to find the most efficient solution. The HFC-free McDonald's met with solid approval from environmental organisations, commending McDonald's for its leadership actions toward finding better environmental alternatives.

Technical Factors

Changing technology can impact competitive advantage very quickly. Creative applications of technology can give a firm a definite competitive edge, as well as benefit society. The following benefits can be derived from technology: 1. Technology can lead to new goods and services, in the process making existing products obsolete. It also offers consumers more innovative products and services 2. Technology allows for products and services to be made more cheaply and to a better quality standard. 3. New technologies have changed distribution e.g. books via the Internet, flight tickets, auctions, etc. 4. It offers companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc.

The Mcdonalds Case

McDonalds has always been a forerunner when it comes to keeping pace with continuously evolving techniques of producing better quality products economically and quickly (automated burger flippers, fry tossers, and electronic kiosks that let customers key in their own orders). It has also taken initiatives to introduce environmentally friendly equipment in its outlets creating a market demand for such innovative products and setting an example for others to follow.

In June 2004 McDonald's Denmark opened the world's first HFC (hydroflurocarbons)-free restaurant. The restaurant in Denmark is part of a new initiative to help reduce the potential effects of climate change on the environment. This McDonald's is equipped with state-of-the-art refrigeration and ventilation systems using environmentally innovative refrigerants that do not contain freon, or HFCs (hydroflurocarbons). This pilot program is the first of its kind in the quick service restaurant industry. It uses 100% HFC-free technology in all its refrigeration and ventilation equipment, including refrigerators,

refrigerating rooms, freezing rooms, air conditioning equipment, and soda, juice and ice-cream machines.

Keeping in sync with today s tech savvy customer who wants greater choices and overall experience, the company also plans to introduce wireless networking, play stations, video games consoles, Internet terminals, flat-screen televisions and music videos into its revamped stores .It is considering the viability of offering free Internet access with food purchases and has launched chip-and-PIN payment card readers in some countries to make paying by card as quick as paying by cash. Using ADSL broadband connections to authorize transactions, McDonald's has been able to reduce the time to process card payments from thirty seconds to just four. Legal Factors Organizations must operate within a framework of governmental regulation and legislation. Government relationships with organizations encompass subsidies, tariffs, import quotas, and deregulation of industries. The major purposes of business legislation include protection of companies from unfair competition, protection of consumers from unfair business practices and protection of the interests of society from unbridled business behavior. The legal environment becomes more complicated as organizations expand globally and face governmental strictures.

A firm engaged in international business cannot afford to be ignorant of the legal restrictions, rules, laws, legislations etc. in not only its home country but also in all the countries of operations. Moreover in the current scenario emerging changes in the legal environment are heavily influencing the working of the fast food industry. The fast-food chains and food manufacturers are facing threat of lawsuits worldwide on grounds like false advertising, failure to provide labeling about caloric content or even fostering food addiction. The food industry's greatest vulnerability is how it targets children. The first-ever class-action suit against McDonald's was filed recently on behalf of children who suffer health problems as a result of eating McDonald's food. Such lawsuits are a major threat to the operation of any firm as millions of dollars are spent in legal damages in such product liability cases.

Thus McDonalds (fast food industry) has to gear itself up in order to counter the threat of such lawsuits at present and prevent similar outbreaks in future as well.

Sociocultural Factors The social-cultural environment refers to the relationship between the marketer and society and its culture. Developing social trends may impact how an organization operates. The social and cultural

influences on business vary from country to country. It is very important that such factors are considered. Factors include: 1. What is the dominant religion? 2. What are attitudes to foreign products and services? 3. Does language impact upon the diffusion of products onto markets? 4. How much time do consumers have for leisure? 5. What are the roles of men and women within society? 6. How long are the population living? Are the older generations wealthy? 7. Does the population have a strong/weak opinion on green issues? Social/cultural forces are the most difficult uncontrollable variables to predict. It is important for organizations to understand and appreciate the cultural values of the environment in which they operate. The cultural environment is made up of forces that affect society's basic values, perceptions, preferences, and behaviors. Many societies have their own values and beliefs which include equality, achievement, youthfulness, efficiency, practicality, self-actualization, freedom, humanitarianism, mastery over the environment, and acceptance of responsibility. Changes in social/cultural environment affect customer behaviour, which affects sales of products. Trends in the cultural environment include individuals changing their views of themselves, others, and the world around them and movement toward self-fulfillment, immediate gratification, and secularism. Worldwide, there is a movement amongst labour unions against the labour policies of McDonald s. There has been a hue & cry against exploitation of cheap labour, poor working conditions in all fast food restaurants, including McDonald s.

Economic Factors Organizations need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. The economic environment consists of factors that affect consumer purchasing power and spending patterns. Economic factors include business cycles, inflation, unemployment, interest rates, and income. Changes in major economic variables have a significant impact on the marketplace. For example, income affects consumer spending which affects sales of organizations. People spend, save, invest and try to create personal wealth with differing amounts of money. How people deal with their money is important to organizations. Trends in the economic environment show an emphasis on global income distribution issues, low savings and high debt, and changing consumerexpenditure patterns.

Organizations can t control the problems that have arisen, and that may continue to develop, at various hot spots across the global economy. But they can and should take proactive steps to shelter their organizations from unwanted consequences of a worldwide downturn. When an organization's underlying financials are strong, it is able to capitalize on competitors' weaknesses, prosper, and continue to grow, even in adverse economic times.

Company

Profile

McDonald s Background

Two brothers, Richard and Maurice McDonald founded McDonald s in 1937. The brothers developed food processing and assembly line techniques at a tiny drive-in restaurant east of Pasadena, California. In 1954, Ray Kroc, a milk-shake mixer salesman, saw an opportunity in this market and negotiated a franchise deal giving him exclusive rights to franchise McDonald s in the USA. Mr. Kroc offered a McDonald s franchise for $950 at a time when other franchising companies sold restaurant and icecream franchises for up to $50,000. Mr Kroc also took a service fee of 1.9 per cent of sales for himself plus a royalty of 0.5 per cent of sales went to the McDonald brothers. The McDonald s brothers sold out for $2.7 million in 1961. Kroc was somewhat of an obsessive individual, fixated with rules, regulations, procedures, and obedience to his strict rules of discipline. Kroc was especially concerned with maintaining McDonald's clean image, as well as that of life in general, and could regularly be seen picking up litter outside of his restaurants in order to maintain the high standard of cleanliness upon which many of his principles were based. During the 1960s, McDonald s invested a great deal of capital into advertising and marketing campaigns.

In 1962, the golden arches were adopted as its corporate logo, with the introduction of Ronald McDonald as its mascot arriving the following year. In 1965, McDonald s Corporation went public, and by 1966 was listed on the New York Stock Exchange. In 1967, its first restaurants outside of the United States were opened in Canada and Puerto Rico. 1968 saw the introduction of the company s flagship product, the Big Mac. Throughout the 1970 s, McDonald s became involved with a lot of charity work, establishing its own charity called the Ronald McDonald House, providing temporary housing for the families of seriously ill children. Kroc had always believed in giving something back to the community in order to make the world a better place. In 1973, McDonald s added breakfast items to its menu. The Quarter Pounder was introduced in the subsequent year, as sales reached $1 billion. 1974 saw the opening of the first restaurant in the UK, in Woolwich, South London. In 1975, McDonald s introduced drive-thru window service, which allowed motorists to order and receive food from their cars. Nowadays, this type of business accounts for around half of all McDonald s sales in the United States. In

1983, Chicken McNuggets were added to the menu, giving customers an alternative to beef. Founder Ray Kroc died in 1984.

Ronald McDonald Children s Charities was founded in his remembrance to raise funds in support of child welfare. In 1989, McDonald's became listed on the Frankfurt, Munich, Paris, and Tokyo stock exchanges. Through the 990s smaller outlets known as Express stores were opened in hospitals, zoos, airports, and even on ferries. These outlets served a limited menu and lacked some of the amenities of larger stores. In 1996, McDonalds signed a 10-year agreement with The Walt Disney Company. This agreement has led to the introduction of restaurants at Disney theme parks, and the promotion of Disney films through McDonald's. Packaging is the primary source of advertising, along with the addition of limited edition products added to the menu. Examples include Pocahontas and The Lion King.

McDonald s first international venture was in Canada, during 1967. Shortly afterwards, George Cohon bought the licence for McDonald s in eastern Canada, opening his first restaurant in 1968. Cohon went on to build a network of 640 restaurants, making McDonald s in Canada more lucrative than any of the otherMcDonald s outside the USA.

The key to the international success of McDonald s has been the use of franchising. By franchising to local people, the delivery and interpretation of what might be seen as US brand culture are automatically translated by the local people in terms of both product and service. McDonald s now has over 20,000 restaurants in over 100 countries, and around 80 per cent are franchises.

McDonalds India McDonald s India, a locally owned company is managed by two Joint Ventures, one in the North, Connaught Plaza Restaurants Pvt. Ltd. run by the Joint Venture Partner Mr. Vikram Bakshi the other in the Western Region, Hard Castle Restaurant Pvt. Ltd. managed by the Joint Venture Partner Mr. Amit Jatia. At present there are 34 restaurants and 3 food courts in the Northern Region - Delhi (23) Noida (3) Faridabad (1) Gurgaon (3) Jaipur (2) Mathura (1) Ludhiana (1) Lucknow (1) and Chandigarh (1). There are 20 restaurants in the Western Region in Mumbai, Pune, Ahmedabad and Vadodra. In the past eight years Mcdonalds has a number of firsts to its credit: [pic]1996 the first McDonald s restaurant opened on Oct. 13, at Basant Lok, Vasant vihar, New Delhi. It was also the first restaurant in the world not serving beef on its menu [pic]1997 the first Drive '' Thru restaurant at Noida [pic]1999 the first Mall location restaurant at Ansal Plaza '' New Delhi

[pic]2000 the first highway restaurant at Mathura [pic]2001 the first thematic restaurant at Connaught Place [pic]2002 the first restaurant in a food court at 3C s, Lajpat Nagar and the first restaurant at the Delhi Metro Station at Inter State Bus Terminus McDonald s Role in the Indian Economic Growth

McDonalds India has already contributed directly & indirectly Rs. 95 Crore (approx. 16 per cent of total turnover) as revenue to the Center and the State towards Sales Tax, House tax and Income Tax in the last seven years. By 2005 this amount shall see an increase of more than 30 per cent per annum.

McDonalds Business Model

McDonalds spread its wings beyond USA primarily for the following reasons: To have larger customer base. To reduce the dependency on the American market (the company had been facing some criticism regarding the nutritious value of their products). Foreign markets present higher profit opportunity then the domestic market. To counter attack the competitors in their own market by making a global presence.

McDonald s global strategy can be summarized as strict quality and consistency standards, innovation and continuous development, central promotional campaign and adaptability to local environments.

The McDonald s model produced stunning annual average revenue growth of 24 percent from 1965 to 1991. The company increasingly turned overseas in the 1990s, opening 2,000 restaurants globally in 1996, the peak year of expansion.

One of the unique features of McDonald s business model is that it extracts huge revenues from the real estate business, unlike its competitors McDonald s owns many of its outlets and collects rent for their use.

Over the years McDonald s has diversified their restaurant interests by operating fast food chains under other brand names such as Aroma Caf, Boston Market, Chipotle Maxican Grill, Donatos Pizza and Pret A Manager.

Global Marketing

[pic]

Global marketing steps can be broadly into:

Internationalize Business Country Market Selection Market Entry Selection Global Marketing Decisions

Internationalize Business

Firstly, the firm needs to decide why and to whether it should extend its operation across its frontiers and what would be the revenues accruing thereof. There are both pros and cons in extending the firms operations. Some of them are:

[pic]

Operational Considerations

|Strategy |Global | |Multi-Domestic

|Advantages |Exploit experience curve |Exploit location economies |Customized products

|Disadvantages

| |

|Lack of local responsiveness | | |No location economies

| | |International | | | |Transnational | | |

| |

|No experience curve effect |No transfer of core competencies |Transfer distinctive competencies

| |

|Lack of local responsiveness

| |

|No location economies |No experience curve effect |Exploit experience curve

| | |

|Difficult to implement | | | | |

|Exploit location economies |Customized products |Global learning |

Country Market Selection

Once the company decides on going global it must then think as to which country to go to. For this it weighs the attractiveness of the country along with the competency of the firm, resulting in a matrix as shown below;

[pic]

[pic]

While deciding on the country to enter, the firm also gives weightage to the risks involved in each country- both political and economic risks, in proportion to the opportunity available for them. This results in an Opportunity-Risk Matrix as shown below;

[pic]

[pic]

Market Entry Selection

After selecting the country, the firm must decide as to in what form it would enter the country. The various forms of entry are as follows:

Contractual Agreements

Then again the firm decides as to in which mode it should enter the country.

[pic]

1) Ethnocentric Orientation Characteristic of domestic & international companies Opportunities outside the home market are pursued by extending various elements of the marketing mix

Home country marketing practices will succeed elsewhere without adaptation; international marketing is viewed as secondary to domestic operations

2) Polycentric Orientation Characteristic of multinational companies Marketing mix is adapted by autonomous country managers

Management of these multinational firms place importance on international operations as a source for profits. Management believes that each country is unique and allows each to develop own marketing strategies locally

3) Regiocentric or Geocentric Orientation Characteristic of global / transnational companies

Marketing opportunities are pursued by both extension & adaptation strategies in global markets

Regiocentric and Geocentric are synonymous with a Global Marketing Orientation where a company strives to develop integrated market strategies for several countries, countries in a region, or the entire world

To summarize the various strategies,

[pic]

EPRG APPROACH '' THE MCDONALDS CASE

[pic]

1. Management '' Polycentric + Geocentric

Local people are handling the management, therefore McDonalds has adopted a polycentric approach. However, at the same time, the top level management comprises of people from the home country.

2. Promotion '' Polycentric + Geocentric

The I m lovin it campaign is a geocentric approach because it is a common thread of promotion which is running across the world by only giving it a little local flavour ( country specific ) . It is adapted to the requirements of a particular nation .

3. Product '' Polycentric

The menu has been adapted and moulded to suit the local needs. In some countries the adaptation is to such a large extent that it has led to major changes in the product or has changed the product completely. For e.g. '' In Japan McDonalds is serving noodles , Soup in China , McAloo tikki Paneer salasa in India are examples of their polycentric approach. burger and

4. Research '' Polycentric

A company will not enter into a market where there is no demand for fast food products. It is also important to understand that each market is different and unique in its own way. This makes it extremely important to undertake country specific research before launching commercial operations in a market.

The data obtained in the A C Nielson Consumer Survey (Recent Trends) points to the diversity in consumer opinion, perception and purchase behavior which a fast food company like McDonald s must take into account before deciding upon entering a market.

5. Planning '' Golden Arches / Ronald

I m lovin it

[Geocentric: change of language and colour]

Polycentric [Adapted them to the local needs i.e. the representation of the slogan]

I m lovin it campaign in India shows a lady cleaner with the duplicates of Devanand, Dilip Kumar and so on.

Toh Aaj McDonalds ho jaye.

McDonalds mein hai kuch baat.

I m lovin it .

Segmentation Segmentation variables include geography (region of the country, country size, city size), demographics (age, gender, family size, income, education), psychographic factors (lifestyle, social class, personality) and behavioral characteristics (benefit sought, attitude toward product, user rate, user loyalty). However, it is important to understand that all these factors do not enjoy the same status. Rather segmentation analysis begins with an assessment of usage. Demographic correlates of usage are then used to make a segmentation strategy actionable. Other factors, such as benefits sought can be introduced to enrich the strategy developed, but they generally do not constitute a primary basis for segmentation. Market segmentation is a vital step in the marketing planning process; Segmentation involves subdividing markets, channels or customers into groups with different needs, to deliver tailored propositions which meet these needs as precisely as possible. The main aim of market segmentation is to enable a company to target its effort on the most promising opportunities, and to find a way of differentiating itself from the competition.

Need For Segmentation: Segmentation needs to be undertaken for the following reasons: Better serving customers needs and wants Higher Profits Opportunities for Growth Sustainable customer relationships in all phases of customer life cycle Targeted communication Stimulating Innovation Higher Market Shares [pic]

For segmentation to be effective, the following criteria should be kept in mind: Feasibility: Having in place a marketing program for each segment and drawing advantages from that.

Distinguishing ability: Market segments have to be diverse enough to show different reactions to different marketing mixes. Accessibility: The segment has to be accessible and servable for the organization. Relevance: The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment. Measurability: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts.

A company can segment its market on different basis/characteristics. Some of them are as follows:

Behavioural segmentation Behavioural segmentation divides customers into groups based on the way they respond to, use or know of a product.

Benefit segmentation Benefit segmentation relates to the process of dividing a market based on the specific benefits consumers seek from a product.

For example, Some McDonalds customers look for lower prices, some for taste, some want variety. The firm, therefore, has to decide which benefits to offer '' and how these benefits should be communicated to the customer

Demographic segmentation Demographic segmentation consists of dividing the market into groups based on variables such as age, gender family size, income, occupation, education, religion, race and nationality.

McDonalds segments its market on the basis of age groups and offers unique products to delight consumers in each segment. E.g.: Happy Meals for children and Egg McMuffin for the elderly.

Gender segmentation The segmentation of markets based on the sex of the customer. The cosmetic industry is a good example of widespread use of gender segmentation

Geographic segmentation Geographic segmentation divides markets into different geographical Units.( region of the country, country size, city size )

Lifestyle segmentation Lifestyle segmentation of a market is based on identifying lifestyle characteristics of customers that enable target customer groups to be identified. Many businesses now segment their markets by lifestyles, as these are increasingly seen as good predictors of consumer behavior. Most companies use off-the-shelf research-agency classifications (such as the Target Group Index), because of the high cost and complexity of developing their own.

Occasion segmentation A basis of segmenting a market based on occasions when buyers get the idea to make a purchase, actually buy, or use a purchased item.

Psychographic segmentation Psychographic (or lifestyle ) segmentation seeks to classify people accordingly to their values, opinions, personality characteristics and interests.

McDonalds has also introduced a number of products to cater to segments according to their different values. E.g.: It offers regular hamburger for vegetarians and or the health conscious that tastes like the real thing but is made of plant material like Soya beans (low on calories as well). McDonalds also uses a combination of demographic and psychographic segmentation to divide its target market and cater specifically to the middle and the working class. This is because these are the people that are more susceptible to enter a fast food restaurant, since they lead a fast moving life and thus require a fast meal. Positioning How a product differs from its competitors

In the words of Philip Kotler, positioning is The act of designing the company s offering and image to occupy distinctive place in the minds of target market . Positioning reflects the "place" a product occupies in a market or segment. Every product has some sort of position whether intended or not. Positions are based upon consumer perceptions, which may or may not reflect reality. A position is effectively built by communicating a consistent message to consumers about the product and where it fits into the market through advertising, brand name, and packaging. A successful position has characteristics that are both differentiating and important to consumers. In case of McDonald s the word target market varies from market to market or from country to country.

The company has positioned itself as the good quick bite experience in terms of quality as compared to the other players but the problem lies with perception of customers. This tells that consumer perception is more important than actual product offerings. McDonald's Restaurants which were once known only for its burgers today carry a different association in the minds of people: - hamburgers, fun, children, fast food and golden arches.

Positioning For Success: Who Are You and What Are You Trying To Do? Positioning begins with establishing an identity. The concept is easily understood when you look at examples. McDonalds and Bellisio's (fast food chain) have created two very different identities in the Duluth fast food market. Each has targeted a different consumer niche. McDonalds is fast food with no surprises, the same burgers that you get it in Ohio or Michigan or South Carolina. By way of contrast, from the wine racks to the menu selection Bellisio's speaks to a different class of consumer.

Positioning is more than branding. When you think of McDonalds you not only have golden arches in your head, but you have a product and experience as well. Getting the name Bellisio's into the market means nothing unless there is also an association made with the identity.

According to AcNielsen market survey in 2003 showed that McDonald's was perceived by consumers as a provider of very good children's burgers, while the product was perceived as somewhat lower in quality in the adult burger market. As a result, McDonald's introduced the Arch Deluxe, a more "sophisticated" burger, and invested in an extensive media campaign to position this new product in the market.

Another positional problem that McDonald's faces is that the restaurant chain is perceived as a lunch time eating place, and not as much as a place to have dinner. Since much wasted capacity exists in the evening, McDonald's has tried a number of tricks to get consumers to come in. They have experimented in some locations, for example, by expanding the menu to include choices such as pizza. Burger King, a

competitor, tried in some locations to go a bit more upscale by offering a more sophisticated dinner menu, with orders being taken and served by waiters at the table. Generally, these efforts have not helped much.

"Advertising does help in positioning the product in the market, but advertising alone does not sustain a brand" -Vikram Bakshi, MD McDonald's

In India McDonald's is known as a family restaurant. They believe that they are here to make their customers feel at home and enjoy their time out with their family when they are at McDonald's. Extra care has been taken to make their restaurants child friendly, by providing play areas wherever possible so that the parents can relax and have a good time when they are visiting McDonald's. This shows that the McDonalds have distinctively positioned itself in the Indian market.

Positioning Strategies In the course of developing a strategic plan, organizations find themselves taking a step back to ask the question, "How can we differentiate ourselves from the competition?" The answer to this question often results in the development of positioning strategies, which are broad operational strategies that organizations use to distinguish themselves and drive their success. The choice of a particular positioning strategy can have a significant impact on the strategic direction of the organization.

Michael Treacy defined three primary positioning strategies: Operational Excellence Product Leadership Customer Intimacy His research indicated that the best organizations in the world, while at least adequate at all three, typically distinguish themselves in one of the three areas. McDonalds - Operational Excellence McDonalds distinguish itself by doing business faster, more consistently, or more efficiently than anyone else. They have fine-tuned the operation so well, that you as a customer expect perfection every time. McDonalds - Customer Intimacy McDonalds strives to win by knowing its customers better than anyone else and using that knowledge to competitive advantage. In a world replete with poor service, McDonalds stands out by delivering

consistently courteous service, which has became the competitive advantage of McDonalds. Ritz Carlton, Nordstroms, Amazon.com are good examples of such positioning strategy. Finally we can say that the McDonalds has marketing dominance. They have won by positioning their products in the hearts and minds of their customers, better than anyone else. Finally, is it operational excellence, product leadership, customer intimacy or marketing dominance? In case of McDonalds it s a combination of all.

[pic]

[pic]

Product

[pic]

[pic]

When did your favorite McProduct come into existence?

|1955 | |1963 |1968 |1973 |1974 |1977 |1978 |1979 |1983 |1986 |1987 |1998 |1999

|Hamburgers, cheeseburgers, fries, shakes, soft drinks, coffee and milk

|Filet-O-Fish |Big Mac and Hot Apple Pie |Quarter Pounder and Egg McMuffin |Cookies |Breakfast Menu |Sundaes |Happy Meals |Chicken McNuggets |Biscuit Sandwiches |Salads |McFlurry Desserts |Breakfast Bagels |

| | | | | | | | |

| |

|2000 |2001 |2003 | |2004

|Chicken McGrill and Crispy Chicken |Big N' Tasty |Premium Salads, Newman's Own salad dressings and McGriddles |

|2004 Chicken Selects Premium Breast Strips

The best way to hold customers is to constantly figure out how to give the customers more for less. Product is the key element in the market offering. Marketing mix planning begins with formulating an offering to the target customers needs or wants. McDonald s core product and focus continues to remain burgers. Its marketing strategy is simple - satisfying the customer.

The biggest establishment in the fast-food market needs to be the leader of customer satisfaction. To satisfy the customers in the fast food market one needs to satisfy the basic needs of the customer. McDonald s serves the world some of its favorite foods - World Famous French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin. Many of McDonald s ideas for reviving its global fortunes involve expanding beyond the hamburger.

One of the aims of McDonald s is to create a standardized set of items that taste the same whether in Singapore, Spain or South Africa. The structure of the McDonald s menu remains essentially uniform the world over: main course burger/sandwich, fries, and a drink along with an overwhelmingly Coca-Cola.

McDonald s learned that, although there are substantial cost savings through standardization, being able to adapt to an environment ensures success. Therefore the concept of ``think global, act local has been clearly adopted by McDonald s. Adaptation is including consumer tastes/ preferences and laws/customs. There are many situations where McDonald s adapted the product because of religious laws and customs in a country. With guidance from its local partners, McDonald's is able to adapt where necessary - its menu and restaurant operations to complement existing eating-out options. McDonald's local owners understand what their customers want and perhaps more importantly, what is acceptable within local customs and values.

Adaptation

In Israel, after initial protests, Big Macs are served without cheese in several outlets, thereby permitting the separation of meat and dairy products required of kosher restaurants.

In Malaysia and Singapore, McDonald s underwent rigorous inspections by Muslim clerics to ensure ritual cleanliness; the chain was rewarded with a halal (``clean , ``acceptable ) certificate, indicating the total absence of pork products.

In UK, in a break from McDonald's traditional reputation as a burger and fries joint, the new range brings in balsamic dressing and rocket as salad ingredients and Evian water . The move comes after McDonald's, mindful over growing public anxiety about obesity, revealed that it was dropping its "super size" portions.

McDonald s restaurants in India serve Vegetable McNuggets and a mutton-based Maharaja Mac (Big Mac). Such innovations are necessary in a country where Hindus do not eat beef, Muslims do not eat pork, and Jains (among others) do not eat meat of any type.

Adapting the product offer

There are also many examples of how McDonald s adapted the original menu to meet customer needs/wants in different countries.

In tropical markets, guava juice was added to the McDonald s menu. In Germany, beer is sold as well as McCroissants. Chilled yogurt drinks are available in Turkey, espresso and cold pasta in Italy. Teriyaki burgers are sold in Japan, vegetarian burgers in The Netherlands. McSpaghetti has become increasingly popular in the Philippines. McLaks (grilled salmon sandwich) are sold in Norway, McHuevo (poached egg hamburger) in Uruguay. In Thailand, McDonald s introduced the Samurai Pork Burger with sweet sauce.

In the last two years in India, it has introduced some vegetarian and non-vegetarian products with local flavors that have appealed to the Indian palate. Efforts are on to enhance variety in the menu by developing more such products. In addition, they've re-formulated some of their products using spices favoured by Indians. Among these are McVeggie burger, McAloo Tikki burger, Veg. Pizza McPuff and Chicken McGrill burger. They've also created eggless sandwich sauces for vegetarian customers. Even the soft serves and McShakes are egg-less, offering a larger variety to Indian vegetarian consumers. McDonald's has also added Chatpatey (spicy) Potato Wedges and the Wrap to their menu in 2002. McDonald's commitment to its Indian customers is also shown in its development of special sauces that use local spices.

Food Ingredients

Suppliers are dedicated to providing McDonald's with top quality material that is continually monitored for freshness and safety. McDonald s uses regional suppliers to ensure that the freshness is delivered to customers in every product they buy. Food quality is key at McDonald s. They seek out fresh lettuce and tomatoes, quality buns and potatoes, pure ground beef, select poultry and fish and wholesome dairy products. All of the beef, chicken and pork that are used are purchased from federally inspected facilities to ensure freshness, wholesomeness and peak quality when served to customers.

Non-Vegetarian Ingredients Chicken The chicken products are made from high quality boned breast and leg meat and are covered in a specially seasoned, lightly battered coating. They are shaped in uniform sizes to ensure consistency in weight and value. Fish The fish products in McDonald's Filet -O-Fish are 100% pure whole white fillets that are lightly breaded. Their exacting quality standards for fish surpass federal requirements. The ocean-fresh quality of Filet-OFish is a result of the process and ability to freeze the fish at sea to maintain freshness.

Vegetarian Ingredients Vegetables McDonald s use freshly shredded lettuce, onions and tomatoes in their restaurants. All their vegetable products are processed from high quality graded vegetables in a 100% dedicated vegetarian plant. Potatoes McDonald's French fries are famous around the world. To make French fries, McDonald s uses only the best potatoes available from their own potato farms. Their potato suppliers make many of the same nationally recognized brands of potato products to make customers feel that they are with their family at home. These potatoes are cut, blanched and processed on state-of-the-art processing lines to ensure maximum retention of nutrients. Their French Fries and Potato Wedges are cooked at the plant in 100% vegetable cooking oil. Other Ingredients

Cheese & other Dairy Products All dairy products like cheese, McShakes and Soft Serves are made from fresh dairy milk. All dairy products including cheese have a role to play in a balanced diet because they contain a wide variety of essential nutrients such as protein, calcium, fat solubles, phosphorus, etc. McDonald's uses a special blend of pasteurized American cheese to complement the flavour of their sandwiches. Buns McDonald's uses buns made from locally grown wheat flour. They are baked locally and delivered fresh, several times each week to McDonald's restaurants. Cooking oil Food preparations are done in 100 % refined vegetable oils at the restaurants and plants. They use liquid oil and not hydrogenated oil. This means there are no TFAs or Trans Fatty Acids in the French Fries or any other products. Additionally, these vegetable oils contain some essential fatty acids [EFA] necessary for growth. McMenu McDonald's customers always receive the hottest and freshest food right after they've ordered. And this, at the speed they've come to expect of McDonald's, which has defined fast service for the past five decades. Food quality is the crucial element at McDonald's. Despite extensive and meticulous quality tests at the supplier end, all products are once again carefully scrutinized at the restaurant. Immaculate standards of quality allow for nothing but the best to reach customer s tray. Their products are sourced from the highest quality ingredients, prepared hygienically and treated to regular quality checks such as the McDonald s Quality Inspection Program (QIP). Though all McDonald's food products offer tremendous value, they continually review and improve their menu offerings to make sure that they not only meet their customers expectations, but also exceed them. As a result, the company keeps introducing a series of ongoing value options to enable their customers to appreciate this aspect of the brand even more strongly. VEG MENU McVeggie , Paneer Salsa Wrap , Crispy Chinese, Veg McCurry Pan , Brocolli n Mushroom, Pizza McPuff NON VEG MENU McDonald's Chicken Selects, McDonald's Dollar Menu, McDonald's McGriddles Breakfast Sandwiches, McDonald's Premium Salads

McDonald's celebrated year 2002-03 as the 'Year of Taste' as a part of which a plethora of new offerings like The Wraps - Paneer Salsa for vegetarians, Chicken Mexican for non vegetarians and McCurry Pans have been introduced. McCurry Pan was the first baked dish in McDonald's product portfolio in India.

Mcdonald s has always offered tea and coffee in their menu at their restaurants but recently McDonald s has tied up with Coca - Cola to serve their Georgia Gold brand hot beverages in their restaurants. McDonald s believes in providing variety and in keeping with this it tries to add value to the customer s eating out experience. McDonald s has its own soft-serves to which it has received overwhelming response.( soft serve sales have gone up by 25%). But they keep introducing new items to their menu. Before introducing any product on the menu, the company conducts extensive consumer research. Cadbury enjoys a 70% share in the chocolate market. McDonald s introduced McSwirl as it offers a fantastic product to consumers at a great price, which is basically a value addition.

Quality, Service, Cleanliness (QSC)

McDonald s uses the finest available products and carefully developed formulae. They also encourage their employees to check products that they prepare or serve. McDonald s believe that cleanliness is a magnet drawing customers to their restaurants , and therefore aim to ensure that their restaurants are spotless at all times, both inside and out. Quality and cleanliness, however, are wasted without fast, courteous service. McDonald s firmly believe that a smile does as much to bring a customer back as does the best food in the world. McDonald s always reminds its employees that the customer is the most important single factor in their business. They also train their employees to treat everyone, especially the customer, in the way that they would want to be treated themselves. Mystery Diners, employed by the company, visit each store once a month checking that overall customer service requirements are met. McDonald s believe that through delivering great levels of QSC, (Quality, Service, Cleanliness), 100% customer satisfaction can be achieved, enabling them to become the customer s favorite quick service restaurant.

[pic]

[pic]

Price

[pic]

Pricing objective of McDonald s '' To serve the customers

The marketplace today is complex network of interacting layers, dynamically reshaping themselves to suit the purpose of business. The changes have been compounded by the new paradigms established in

customer management and loyalty and heightened levels of competition and revenues require micro management. Yet this entire complex ecosystem still follows the primary principles of business, money for goods and services consumed . It is hardly surprising therefore that pricing has become a complex activity.

In the overall marketing mix of McDonald s, price is probably the most important item that can affect a company s sales and profitability. The main purpose of this P to set the price level and measure its impact on McDonald s business model.

Pricing Decisions

Factors, which McDonald s have taken into account while determining prices especially in the global scenario

Cost The essential question is what kind of costs to be considered in order to price the product. Some of the international marketing costs include market research cost, product modification cost, packaging cost etc. while deciding the price level.

Competitors Burger King s and McDonald s price war.

Wendy s I$ Burgre in the Australian market.

Nirulas, wimpy and local players in Indian market (like Keventers) in the unorganized segment.

Exchange rate A firm engaged in international transaction cannot ignore the exchange rates while determining the price level in the foreign market. In India McDonald s haven t priced its products as they have done in the European countries or for say USA or UK. In USA McDonald s came up with the one$ burger but in India the company cannot price its burger at this rate.

Pricing Strategies '' McDonald s

There are many ways to price a product. Let's have a look at McDonald s Pricing strategy.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the pricing strategy. McDonald s pricing strategy is a combination of some, which are: -

Penetration Pricing The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. In New Zealand McDonald s use this strategy to eliminate one local fast food chain.

Economy Pricing This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. McDonald s have always priced its product at relatively lower level in the Indian market. Even in the USA the company has come out with the one Dollar meal to provide the more value for their money.

Product Line Pricing Here sellers combine several products in the same package. Where there is a bundle of product or services is combined to provide more value to the customers. Time to time McDonald s come out with the combo packs or happy meal to serve the desire of the customers.

Promotional Pricing Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as Buy One Get One Free. In India McDonald s have the concept of Happy Hours in which you buy one product and you get one free. For example you buy one coke and you get other for free.

Value Pricing

This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales. e.g. value meals at McDonalds.

McDonalds has a target of value prices and of restraint, or reduction in real prices over time, to the extent that is sustainable). The McDonalds set up is proposition to this low-price bias in an environment in which the interests of McDonalds and the licensees are hotly opposed, not co-operative or similar.

A Skeletal Model of McDonalds Pricing: To understand the in-built incentives for McDonalds to keep the price as low as possible and to do so against the interests of the licensee. The following model is realistic in that the central components are related to ratios and market circumstances that capture the McDonalds system and current service fee rules and cost conditions. Assume the following: -

1) Base case sales of 1000 hamburger meals over a period (like a day or part of a day) at meal price $5. Thus product sales revenue of $5000. 2) Food costs of $2.50 per meal, making $2500 in the trading period. 3) Other consumable costs set at $1000 for the trading period, thus Profits After Consumables at $1500 (or 30% of sales revenue). 4) System Fee of $250, being 5% of sales. 5) An alternative discount situation has a 10% price drop to $4.50 per meal with instant price-elasticity of 1.5 (consistent with McDonalds strategy of not discounting unless sales revenue expands). Volume thus rises to 1150 meals, and food costs from $2500 to $2875. PAC is now $5175 less $2875 less $1000 = $1299 (or 25% of sales). 6) The system fee in the alternative discount situation expands to capture 9% of the entire increase in sales revenue (2.8.5-7), thus to $266, which remains within the 7% cap. 7) The inference is that the licensee receives a sum of $1250 as PAC less system fee in the base case, but only ($1299-$266) $1033 in the price discount scene.

The obvious and compelling inference is that the interests of McDonalds and the licensee are diametrically opposed here. With the discount, McDonalds gets a 6% increase in service fee income and the licensee suffers a 17% cut in income defined as PAC less service fee. This example shows very bluntly why the interests are opposed, why McDonalds has an in-built incentive in this structure to maintain low prices, and why franchisees are disadvantaged.

Pricing decisions

For each country, there is a rigorous pricing process that is used to determine the price for that particular market. The process is listed below: (1) Selecting the price objective; (2) Determining demand; (3) Estimating costs; (4) Analyzing competitors costs, prices and offers; (5) Selecting a pricing method; and (6) Selecting a final price. [pic]

McDonald s has realized that, despite the cost savings inherent in standardization, success can often be attributed to being able to adapt to a specific environment. This is indeed the case with its implementation of its pricing strategy, which is one of localization rather than globalization. Table II illustrates the comparative Big Mac prices (flagship brand of McDonald s) from around the world. It succeeds in highlighting the point that McDonald s has had to come up with different pricing strategies for different countries. More importantly, rather than just having a different pricing policy for the Big Mac in these listed countries, McDonald s has had to select the right price for the right market. The highest comparative price for the Big Mac is that of our own country, the UK, but why is that the case? How McDonald does s come to its pricing decision? The process above sets out the basic framework that allows McDonald s to set localized pricing.

The product life cycle as a determinant of price

The product life-cycle (PLC) is a further example of how the McDonald s pricing strategy is one of localization. The comparison is made between the markets in the USA and Japan, who are at contrasting stages of the PLC. If we use the example of the Big Mac, as illustrated in Table II, we can see that in terms of the UK, in the USA, the Big Mac is priced at 1.13 and in Japan, it is priced at 1.27. This is explained because the US market is in the decline stage of the PLC and so has to cut prices to reestablish lost revenue, as were the case in 1997. On the other hand, the Japanese market is in its growth to maturity phase and so can price the Big Mac higher with greater success in terms of profitability.

[pic]

McDonald s overall pricing objective is to increase market share. In each country, they look at the demand for their product as a barometer for setting price. In the USA, for example, a Big Mac with fries costs the equivalent of a Chicago office worker s earnings during 14 minutes. However, elsewhere, a meal like this is perceived as a luxury, as opposed to a normal product, and would cost a lot more relative to earnings. In Nigeria, for example, a corresponding meal would represent 11 hours 23 minutes of work for someone living in Lagos. Thus, depending upon the perception of price by the consumer, then will the price of the McDonald s product be determined.

This can further be explained by looking at model below. It is clear that, although placed in the same box, the consumer in Lagos perceives the McDonald s products as having more quality than the consumer in Chicago. Therefore, in Lagos, the consumer will be willing to pay a higher price relative to their earnings; hence, McDonald s prices its goods accordingly.

[pic]

This pricing strategy does not always work successfully, though, as was the case in the USA in 1997 when McDonald s was losing domestic market share. To combat this, they had to lower prices in an attempt to increase revenues. Similar efforts had also to be made in Japan for the same reason, proving once more the importance of correct price setting.

In August of 2002, McDonalds lowered the price of their hamburger in Japan to 59 yen (50 cents US). At first it brought in a lot of customers and a surge in sales. But the initial euphoria faded as the skepticism, already implanted in people's minds during the previous phase, began to grow. It was pretty obvious, even for naive parents and teenagers that 59 yen would not pay for the hamburger they eat. Accordingly, people assumed that there must be a trick in the pricing scheme, or a skewed price list, which would enable the company to make money. This resulted in apathy among people, and an erosion of the brand image.

The official stance on McDonald s pricing policy is highlighted in the company s mission statement, where it states that the most fundamental element of determining price was:

Being in touch with the pricing of our competitors allows us to price our products correctly, balancing quality and value.

Therefore, it is possible to conclude that, by looking at other competitors in each country, McDonald s can set the appropriate price for their products. In New Delhi, India, McDonald s was looking at market penetration in October 1996, and set price through looking at Nirula s, a local food chain. They used this local example as a guideline to what the Indian would perceive as an acceptable price and hence what they should charge.

A comparative survey of prices was carried out in Hong Kong in June 1994 and demonstrated that McDonald s in price is equal to or cheaper than its competitors in the fast food sector. The remarkable thing is, however, that not only is McDonald s competitive in the fast food sector but its prices remain competitive with those of other food purveyors. In Hong Kong, for example, an Average ``value meal is less than half the price of a simple noodles meal! It is also important to look at the life cycle of a product/brand before setting price, as then it is possible to select a pricing strategy from this

McSwoop McDonald's is using an interesting new strategy to lure the budget-conscious Indian bite-grabber. It is going out for the real market in India- the working class, the people who make up the millions, the actual millions with their meals for just Rs 20.

Localization has been on for a while. Paneer Salsa Wrap and McCurry Pan are just among the newest experiments in wowing the Indian palate. Low-end pricing---as a primary lure-in---has been around for years too, ever since McDonald's struck the idea of a Rs 7 cone of ice cream (the soft serve bait). But a meal for Rs 20 takes it all and the brand is actually grabbing attention. McDonald s is talking mass, Indian style (and lovin' it )

Pricing Strategy of McDonald s = Perceived Value Pricing

Finally for a fast food restaurant what matters is that how the customers perceive the price.

[pic]

[pic]

Place

[pic]

[pic]

McDonalds s today is one of the world s great entrepreneurial organizations, with four out of every five restaurants worldwide run by an affiliate partner of the company or a franchisee.

McDonald s realizes the potential for growth in international markets. Over the long term, markets like China, Italy and Mexico are expected to represent a growing proportion of restaurant additions.

Contractual Agreements

McDonald s has always been A Franchising Company. The McDonald s Corporation is the largest worldwide franchised food service organization. McDonald's has always been a franchising Company and has relied on its franchisees to play a major role in its success. McDonald's remains committed to franchising as a predominant way of doing business. Approximately 70% of McDonald's worldwide restaurant businesses are owned and operated by independent businessmen and women, as franchisees.

[pic]

In the USA, 87% of restaurants are owned and operated by franchisees. In the UK, this figure lies at just over 20%. The Franchisee Business Model McDonald s charge franchisees a levy on sales. This levy consists of a service fee of 4%, and a rent charge of 7%. the McDonald s model produced stunning annual average revenue growth of 24 percent from 1965 to 1991. Clearly, an increase in the number of franchised restaurants leads to the direct effect of an increase in McDonald s revenues. McDonald s can also boast that it is the largest retail property owner in the world. . McDonald s believes that the Corporation can be successful only if the franchisee is successful first. It believes in partnering relationship with its owner/ operators, suppliers and employees. Success for McDonald's Corporation flows from the success of its business partners.

McFranchiser

The company s selection of prospective candidates is based on an assessment of overall business experience and personal qualifications. It looks for individuals with good "common business sense", a demonstrated ability to effectively lead and develop people, and a history of previous success in business and life endeavors. A restaurant background is not necessary. It franchises only to individuals, not to corporations, partnerships, or passive investors.

More specifically, it looks for the following attributes in a potential candidate: Business experience in the market where they are seeking a franchise Demonstrated personal integrity with emphasis on interpersonal skills A willingness to participate in a comprehensive training program A willingness to personally devote full-time efforts to the day to day operations of a McDonald's restaurant business A history of success and the ability to work well within a franchising organization From its side, it offers support in the areas of operations, training, advertising, marketing, real estate, construction, purchasing and equipment

McDonald's has very close relationships with its suppliers, even making sure that their different suppliers communicate with one another regarding procedures, and the introduction of new technology, in order for the McDonald's corporation to maximize its profits through efficient operations.

McDonald s India

We serve around half a million customers on an average, in our restaurants across the country every day.

McDonald s in India is a 50-50 joint venture partnership between McDonald s Corporation [USA] and two Indian businessmen. Amit Jatia s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations. Setting Up Of an Extensive Food Chain

Six years prior to the opening of the first McDonald's restaurant in India, McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards. These standards also strictly adhere to Indian Government regulations on food, health and hygiene. Part of this development involves the transfer of state-of-theart food processing technology, which has enabled Indian businesses to grow by improving their ability to compete in today s international markets.

For instance, Cremica Industries worked with one of McDonald's suppliers from Europe to develop technology and expertise, which allowed Cremica to expand its businesses from baking to also provide breading and batters to McDonald's India and other companies. Another benefit of expertise in the areas of agriculture allows McDonald's and its suppliers to work with farmers in Ooty, Pune and Delhi and other regions to cultivate high quality lettuce. This includes sharing advanced agricultural technology and expertise like utilisation of drip irrigation systems that reduce overall water consumption and agricultural management practices, which result in greater yields. McDonalds has carefully identified local Indian businesses that take pride in satisfying customers by presenting them with the highest quality products. McDonald's India today purchases more than 96% of its products and supplies from Indian suppliers. The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, get exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India. The Supply Chain

Supply Chain is a network of facilities including - material flow from suppliers and their "upstream" suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their "downstream" customers at all levels. So, raw material flows as follows: supplier - manufacturer '' distributor '' retailer '' consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about. When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect. Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond one s immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized. Understanding the value to the downstream customer is part of the supply chain management process.

Cold Chain - Spreading The Spirit of Enterprise All Over India

A unique sense of dedication and commitment characterizes McDonald's India. Commitment to be driven by the leadership of local owners. Commitment to provide quality products and fast friendly service at a real value to support other Indian businesses through local sourcing and imparting new skills and to generate local employment by being a part of the local culture. This commitment has translated into enduring benefits to the businesses at the grass root level, in the areas of introduction of new crops, new agricultural practices and food processing methods and procedures.

McDonald's unique 'cold chain', on which the fast food major has spent more than six years setting up in India, has brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely fresh and at great value.

McDonald's, through its unique cold chain, has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products. This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures. Setting up this extensive cold chain distribution system has involved the transfer of state-of-the-art food processing technology by McDonald's and its international suppliers to pioneering Indian enterprises, who are today an integral part of the McDonald s cold chain.

Local Sourcing Is Key for Truly Indian Products

Around the world, McDonald's traditionally operates with local partners or local management. In India too, McDonald's purchases form local suppliers-. McDonald's constructs its restaurants using local architects, contractors, labour and - where possible '' local materials. McDonald's hires local personnel for all positions within the restaurants

McDonald's sources food products form local companies. Fresh Lettuce comes from Pune, Delhi, Nainital and Ooty; Cheese form Dynamix Dairies, Baramati, Maharashtra; fresh Buns from Cremica, Phillaur, Punjab and Mrs. Bector and Sons, Khopoli, Maharashtra; Sauce from Bector Foods, Phillaur, Punjab and Hindustan Lever Limited-Best Foods Division, Thane, Chicken Patties, Vegetable Patties, Pies and Pizza McPuff from Vista Processed Foods, Taloja, Maharashtra. Dairy Products from Amrit Food, Ghaziabad, UP.

Potato Farming In Gujarat McDonald's India, even prior to its entry into India, was committed to working with local suppliers and farmers to source all its requirements. The company therefore spent 6 years and around Rs. 450 crore to set up the food supply chain even before opening its first restaurant in the country.

India, despite being the world s second largest producer of food, loses nearly Rs.50,000 crore worth of food produce due to wastage at various levels, especially due to lack of proper infrastructure for storage and transportation. McDonald's India has pioneered the cold chain management system wherein the freshness, crispness and nutritional value of vegetables and processed products are retained.

In 1991, McDonald's was looking for a particular variety of potato for manufacturing its world famous French fries. One of McDonald s suppliers '' Lamb Weston '' invested heavily in setting up production lines to process these potatoes and make the fries. However, production was discontinued, as the right quality of potatoes could not be sourced. The right quality potato in India was unavailable as farmers used seeds from the preceding crop, which in turn resulted in a single variety and poor quality potatoes. McDonald s needed the process-grade variety of potato for its products, which are as per McDonald's international quality standards. The variety of potato required by McDonald s had to have a certain length, high solids content and low moisture content while the ones that were available were of the table-grade variety. Nonetheless, as per its initial commitment to local sourcing, McDonald's and its supplier partner, McCain Foods Pvt. Ltd., began to work closely with farmers in Gujarat and Maharashtra to develop process-grade potato varieties.

McCain Foods Pvt. Ltd. is the world s largest French Fry Company in the world. Established in 1957, today it is a brand that is known and respected in more than 100 countries, generating worldwide sales of more than $5.5 billion. It has more than 55 processing plants on 4 continents (29 of which are French fry and potato specialty facilities) and exports to more than 80 countries worldwide.

Leaders in agronomy, technology and innovation, McCain Foods Pvt. Ltd. partnered with McDonald s to work with farmers in Gujarat (specifically the towns of Deesa and Kheda) to interact with agronomists and field assistants to demonstrate the best practices '' right from better agronomy techniques like irrigation system, sowing seed treatments, planting methods, fertilizer application programmes and better storage methods for the produce. In addition to this, the farmers also benefit through incremental monetary gains as they sell directly to McCain Foods Pvt. Ltd. instead of commission agents. The result of these efforts has been that now the Gujarat potato crop has been utilised to make McDonald s Chatpatey Potato Wedges.

Suppliers Trikaya Agriculture - Supplier of Iceberg Lettuce Implementation of advanced agricultural practices has enabled Trikaya to successfully grow speciality crops like iceberg lettuce, special herbs and many oriental vegetables.

Vista Processed Foods Pvt. Ltd. - Supplier of Chicken and Vegetable range of products A joint venture with OSI Industries Inc., USA, and McDonald's India Pvt. Ltd. Vista Processed Foods Pvt. Ltd. produces a range of frozen chicken and vegetable foods. A world class infrastructure at its plant at Taloja, Maharashtra,

Dynamix Diary - Supplier of Cheese Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk.

Amrit Food - Supplier of long life UHT Milk and Milk Products for Frozen Desserts Amrit Food, an ISO 9000 company, manufactures widely popular brands - Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.

Radhakrishna Foodland - Distribution Centre An integral part of the Radhakrishna Group, Foodland specialises in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting.

From Field To 2 C In 90 Minutes

Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural management practices and sharing of advanced agricultural technology by McDonald's has made Trikaya Agriculture extremely conscious of delivering its products with utmost care and quality. Initially lettuce could only be grown during the winter months but with McDonald's expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to grow this crop all the year round.

McDonald's has provided assistance in the selection of high quality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh, high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers away. Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of the crop is maintained between 1 C and 4 C and 95% respectively. Vegetables are moved into the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid vacuum cooling to 2 C within 90 minutes. The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage. With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to other international markets, especially to McDonald's Middle East and Asia Pacific operations. McDonald's expertise in packaging, handling and long-distance transportation has helped Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald's assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated hotels, clubs, flight kitchens and offshore catering companies all over India.

Flavour and Freshness Locked In At - 35 C

Vista Processed Foods Pvt. Ltd., McDonald's suppliers for the chicken and vegetable range of products, is another important player in this cold chain. Technical and financial support extended by OSI Industries Inc., USA and McDonald s India Private Limited have enabled Vista to set up world-class infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as - 35 C. This is vital to ensure that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The frozen product is immediately moved to cold storage rooms.

With continued assistance from its international partners, Vista has installed hi-tech equipment for both the chicken and vegetable processing lines, which reflect the latest food processing technology (deboning, blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both processing lines are absolutely segregated and utmost care is taken to ensure that the vegetable products do not mix with the non-vegetarian products. Now, at Vista, a very wide range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both locally and in the parent companies, work towards innovation in taste, nutritional value and convenience. These products, besides being supplied to McDonald's, are also offered to institutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens, schools and colleges, restaurants, food service establishments and coffee shops.

Today, production of better quality frozen foods that are both nutritious and fresh has made Vista Processed Foods Pvt. Ltd. a name to reckon within the industry.

From Farm to Bulk Cooler in Less Than 90 Minutes

McDonald's suppliers of cheese, Dynamix Dairy, too, recognizing the need for quality milk to make quality cheese, has set up a dedicated quality program for milk procurement. They have made significant investments in setting up bulk coolers at all milk collection centres in the Baramati area, where they are based. Efforts have been made to see that the bulk cooling centres are located in a way that farmers do not have to travel more than an hour from their farms to reach the collection centre. This has drastically reduced the time from milking to refrigeration, which is critical, especially since the lack of proper refrigeration can greatly impact the quality of milk. On receipt, the milk is immediately stored in the bulk coolers at the collection centres, to prevent growth of bacteria in the milk and preserve its freshness - thus, maintaining the 'cold chain'.

And In the End Bringing It To The Consumer

McDonald's local supply networks through Radhakrishna Foodland, which operates distribution centres (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their resources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a very vital role in maintaining the integrity of the products throughout the entire 'cold chain'.

Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the country. These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald's restaurants on the basis of their requirements. The company has both cold and dry storage facilities with capability to store products up to -22 C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state.

All these suppliers share McDonald's commitment and dedication to satisfying customers by supplying them the highest quality products. They are working cohesively to ensure that the final product reaches the customer consistently each time and every time. At their level, every care is taken to guard against any interruptions in the cold chain which can break the link and have a detrimental effect on the quality of the product. And more products reaching the market fresher and quicker not only benefit the economy but also help the farmer earn more.

[pic]

[pic]

Promotion

[pic]

[pic]

Promotion consists of five major tools: (1) Advertising; (2) Direct marketing; (3) Sales promotion; (4) Public relations and publicity; and (5) Personal selling.

Using these tools, McDonald s looks to localise its marketing communications strategy as it needs to consider the enormous range of cultural and other differences that it would be faced with in each country. It would be naive to ignore the various local markets and the factors which may affect the performance of its product in them. It also needs to analyse consumers attitudes towards its product, usage patterns and ethnic, moral and religious considerations in that environment. Although the idea is to promote McDonald s as a global image, McDonald s focuses on the needs of the communities they are entering. In a communications context, the maxim ``brand globally, advertise locally is the McDonald s promotional strategy.

[pic]

Advertising

Ronald loves McDonald s and McDonald s food. And so do children, because they love Ronald.

Children are often the key decision-makers concerning where a family goes to eat. Children exert a phenomenal influence when it comes to restaurant selection. McDonald s constantly advises its marketing and advertising department to do everything they can to appeal to children s love for Ronald and McDonald s

McDonald s has a wide range of advertising campaigns in various countries. For example, in the UK, they use the England footballer Alan Shearer as a figurehead to promote their hamburgers, whereas in France they use Fabien Barthez, the French international goalkeeper. The point is that the image they are trying to convey is the same; McDonald s just uses different personalities in different cultures to get their message across.

In East Asia, McDonald s could not have had the success they have experienced without their appeal to younger generations of consumer: children and teenagers. The corporation makes a point of cultivating this market and invests heavily in television advertising aimed specifically at children.

[pic]

[pic]

A further example of McDonald s acting more locally was when in Beijing, China, the company s male mascot, Ronald, was paired with a female companion known as Aunt McDonald, whose job it was to entertain children. Once more, this shows how McDonald s paid particular attention to the specific market, knowing full well that this new female companion would only be successful in certain international fast food markets and not work on a global scale.

In contrast, in Hong Kong, McDonald s has made great efforts to present itself as a champion of environmental awareness and public welfare, as they see this as an important attribute to the local consumer. A leaflet comparing the Hong Kong fast food industry saw McDonald s adverts as: Promoting McDonald s as a local institution, with a clear stake in the overall health of the community.

In 1994, McDonald s changed their advertising slogan to ``There s nothing quite like aMcDonald s . This saw McDonald s attempting an image change, as they adopted a more personal approach to their customers, trying to talk ``to them rather than ``at them. This was again a bid by McDonald s to add to the whole ``McDonald s experience and to add to their image as a global brand.

Public Relations

A feature of the localization of McDonald s in Beijing is that, in contrast to the US practice of substituting technology for human workers, the Beijing McDonald s relies heavily on personal interactions with customers. In everyday operations, one or two public relations staff in each outlet are available to answer customers questions. Each restaurant assigns five to ten female receptionists to take care of children and talk with parents. The whole courtesy issue is such a big thing in the Far East and so McDonald s has to pay particular attention to this.

There is no need for customer public relations officers in the UK as the British have a completely different mentality and would be more than happy to just eat their meal and leave the restaurant.

There are certain times, though, when McDonald s does adopt a global strategy. In January 1997, McDonald s announced a global alliance with Walt Disney which allowed them to share exclusive marketing rights for everything from films to food, for the next ten years. This has led to McDonald s producing toys in their ``happy meals for films such as A Bug s Life, Toy Story and the latest Disney offering, Tarzan. In this instance, there was no need for McDonald s to act local, asWalt Disney has a world-wide appeal that does not need altering for different communities.

Similarly, another global public relations exercise is the Millennium Dreamers Global Children s recognition programme which is being presented in conjunction with McDonald s, Walt Disney and UNESCO. Young people from all over the world have the opportunity to express their hopes, dreams and plans for the future.

Sports sponsorship

McDonald s sponsors a vast array of sports, on both a national and a global scale. Globally, McDonald s enhances its brand name with such associations as the Olympic Games and the World Cup, the two biggest sporting events in the global calendar. The global nature of the events allows advertisers to produce an international campaign and, with an estimated 2 billion people watching the World Cup, the McDonald s message is easily conveyed. The Olympic Games has also been a valuable advertising tool.

Nationally, McDonald s targets specific events with which it would like to be associated. In the USA, McDonald s has strong links with the NBA (National Basketball Association) and NASCAR racing, two

hugely popular sports in the USA. McDonald s recognises that these sports are only popular in the USA and so chooses just to sponsor these sports within the US boundaries and not on a global scale.

Community relations

McDonald s concentrates on helping ``seek solutions for the problems facing children and families today . There are 160 local RMHCs in 27 countries all aimed at the specific needs of improving the lifestyles of under-privileged children. They attack this global problem by addressing the problems locally.

[pic]

[pic]

[pic]

People

[pic]

Loyalty and dedication are the foundation of every successful business. McDonald s believes that people are their most important asset and values its skilled and motivated employee base.

Crew meetings are held about once a month to discuss policy, procedures, products, and problems in the restaurant. Smaller sessions are also held a few times each year for the purpose of discussing ideas, suggestions and problems. These sessions give employees the opportunity to make their views known to the company. McDonald s supports its employees through university as well. It also runs its own Junior Business Management Programme for 18-21 year olds. It also offers its employees the opportunity to become part of the corporation through buying McDirect shares.

Training

It is the aim of McDonald s to create a learning environment, which facilitates the development of the highest level of skill among all employees. Their training programmes have been designed to enable all employees to achieve the company s goals of 100% customer satisfaction, increased market share and increased profitability. An ongoing programme of training evaluation enables McDonald s to keep training procedures up to date, and relevant to the needs of the business. McDonald s believe that training is the foundation of their success, and that it is an ongoing process that belongs to all of their employees.

Employee Relations

It is McDonald s policy to actively promote from within. Promotion is offered to employees who show initiative and a desire to advance. Many of McDonald s finest managers and senior company personnel have been promoted from crew. This way, skills are kept in the firm, with training costs minimised.

[pic]

[pic]

Process

[pic]

McDonald s trademark competition edge is its process management approach in which the company literally put hamburgers on the assembly line. For McDonald s outlets to succeed they had to attain perfection by breaking the labor into parts and fine tune every aspect of hamburger manufacture. This approach is being imitated by companies all over the world not just fast food companies. McDonald s even has a Hamburger University which is actively engaged in developing efficient food assembly processes and teaching and training McDonald s employees, no other fast food chain goes to such lengths to ensure product consistency

A key feature of the McDonald's model is the manner in which all of their operations are standardised. Production line techniques are implemented in restaurants to achieve the fast preparation of uniform quality products. With a limited menu and patented formulas, the corporation ensures that products remain homogenous over distance and time. The fixtures and fittings of restaurants are largely identical throughout the world, with minor variations to account for cultural differences.

The McDonalds model exerts an enormous amount of control over its franchisees and customers, forming the fundamental basis of the business. Employees respond to customers requests with scripted questions, ensuring the fast delivery of service, and same experience time and time again. Control over employees has been increased over the last decade due to technological advancements, such as EPOS (Electronic Point of Sale) systems, which eliminates the need for the operator use arithmetic, or remember prices.

Standardisation within the McDonalds model is apparent in both the restaurants and their suppliers. Contractors are required to share knowledge of food processing techniques, allowing the corporation to retain consistency and control of all aspects of the business.

Quality Assurance teams are responsible for monitoring the quality of McDonald s food products, both in the restaurants and at suppliers at all stages of production. This involves a continuous round of visits, inspections and audits, announced and unannounced, to all production facilities, distribution centres and restaurants. Visits even extend to secondary suppliers such as farms, to monitor crops growing in the field or to inspect seeds prior to planting. Every supplier manufactures to very tight specifications, which detail the exact quantity and quality of raw ingredients and the dimensions of the finished product. The specifications also stipulate extensive checking procedures. In addition to studying all production run records which are sent to McDonald s by suppliers, McDonald s regularly take samples of stock at distribution centres to ensure that they conform to specifications.

The quality controls continue when the food arrives at restaurants. No delivery is accepted until a series of quality and safety checks is completed. All restaurant staff receive comprehensive training in food safety and hygiene and food preparation procedures. This is a global practice and is one of the distinguishing features of McDonald s as a fast-food restaurant.

About 4 times each year, each restaurant (excluding franchises) is checked rigorously by Area Managers, who make sure the crew and managers are carrying out operations correctly, as well as other general checks. Once a year, a restaurant experiences what is known as a full field , where area managers, other restaurant managers, and trainee managers perform a comprehensive check on the whole operation. The results of these inspections are put into tables, and there is always fierce competition between stores with regard to scores received. Company representatives monitor performance by making surprise visits to McDonald s outlets every quarter.

The point of purchase at McDonald s is again standardized globally. Many companies operating globally discover language translation problems and therefore cannot use systems globally. McDonald s overcame this problem by using pictographs; employees world-wide ring up sales on machines that

display symbols of Big Macs, French fries, or colas instead of words or numerals. Software links price and total items.

Research Analysis

The main objective of our market research is to study: -

Objectives of the research study include

Perception about McDonalds. Factors influencing choice of a Fast food restaurant. Which Fast food restaurant considered as The Best (based on perception and satisfaction level) in the global scenario.

Research methodology

Target Respondents - Foreigners

In order to make this project effective and to show the real picture of the market:

We have studied various players in the Fast food segment. In order to understand the factors influencing the perception and buying behavior of consumers towards fast food restaurants in India and their home country we distributed them questionnaires. For data collection we have used non-probability sampling. In order to reach the analysis stage we have carefully evaluated the questionnaires. For the purpose of tabulation of data we have followed mechanical tabulation

Limitations

The complete depiction of scenario of Global Fast food market was not possible due to various limitations which are:

Our sample size was too small as compared to the huge global market of fast food.

We could not cover the whole segment due to lack of time and experience. Our respondents are from limited countries. Sample size = 50 Uncovered Area: - Unorganized fast food market of the world

Research Design

A research design is simply a frame work or plan for a study used as a guide in collecting and analyzing data. The research design ensures that the study:

1. will be relevant to the problem 2. will use economical procedure

We have used the Descriptive Method as our research design. Descriptive research as their name implies, are designed to describe something '' for example, the characteristics of users of a given product; the degree to which product or service use varies with income, age, sex, or other characteristics; or the number who saw a specific television commercial. A majority of marketing research studies are of this type.

Descriptive studies differ from exploratory studies in the formality with which they are designed. These studies aim to obtain a complete and accurate description of a situation. Formal design is required to ensure that the description covers all the phases desired.

In our project we have studied how the perception of customers varies about a restaurant like McDonalds in two different markets.

Sampling

With non probability samples there is no way of estimating the probability that any population element will be included in the sample. We have chosen our sample units on the basis of accessibility. Thus there is no way of ensuring that our sample is representative of the population.

Our small sample size of 50 and comprises of respondents of few age groups.

13-19, 20-35 and above 35 are the major proportion of our sample as far as age group is concerned. Normally these are the decision maker in a family. But in our case children do excise some influence as far as fast food restaurant (McDonalds) is concerned. This is the major weakness of our research.

Age Groups

Age Groups

Sample Size

Below 12 13-19 20-35 Above 35

01 10 30 19

Total

50

McDonald s India Vs McDonald s Abroad

[pic]

[pic]

Taste of Food (McDonalds India) [pic]

Taste of Food (McDonalds Home Country) [pic]

Variety in menu (McDonalds India)

[pic]

Variety in menu (McDonalds Home Country)

[pic]

Cleanliness (McDonalds India)

[pic]

Cleanliness (McDonalds Home Country)

[pic]

Price level (McDonalds India)

[pic]

Price level (McDonalds Home Country)

[pic]

Attributes considered important for a fast food restaurant

[pic]

Finding: [pic]

90% of the respondents have favored to taste of food as major characteristic while making a choice of their fast food restaurant. The other attributes are cleanliness, price and variety in menu.

The Best Fast Food Option

[pic]

Even as per our research McDonalds is clearly the market leader as far as the best fast food restaurant is considered. 41% of our respondents have rated it as the fest fast food restaurant in the current scenario. Burger King and Subway are the followers with the 29% and 20% respondents respectively.

Conclusion

The Influence of McDonalds

Culture One of McDonald s major achievements was breaking through the food culture barrier. Most countries are eager to preserve their own specific culinary culture, however through successful global advertising, McDonald s operates 30,000 outlets in 120 countries. Egypt, Kuwait, Russia, and China have all been developed with the world s largest restaurant situated in Beijing, which has over 700 seats and 1200 staff. McDonalds has worked extensively on establishing franchises on a multinational scale. In both Moscow and Yugoslavia, the corporation had to set up the infrastructure in conjunction with governments to provide the consistent standard of restaurants found around the world.

McDonalds is fully committed to becoming the global leader paying for the processing plants needed to supply these outlets. McDonalds has worked closely with franchisees around the world to allow them to customize outlets to cater for specific cultural needs. Variations in menu are a key characteristic of cultural variety. In Europe beer is served, and in America yoghurt, salads and pizza are on the menu. Stores are also varied with restaurants ranging from small express outlets in Tokyo, where high retail costs put pressure on space, to the larger restaurants such as the 700 seat outlet in Moscow, which attracted queues of over a thousand people on its first day of operation.

McDonald's Influence on Society

Different businesses and services have adopted a McDonald s style nickname. For example, in the USA, drive in dentists, which deal with minor problems, are known as McDentists. This shows that McDonald s has a reputation for speed, though it also gives evidence that McDonald s is thought of as a basic, simple service, which admittedly isn t too far from the truth. This is an example of the McDonaldisation of society.

The success of McDonald s can be attributed to efficiency, calculability, predictability, and control. McDonald s uses optimum methods of production, and also has an effective body of rules and regulations, which ensure highly efficient work. This reduces wastage and ensures optimum utilization of resources.

Customers are made to feel that they are getting a bargain, are therefore can justify spending their money on a particular item. Predictability is a fundamental aspect of McDonald s success. It gives the public assurance that products and services will be the same over time and in all vicinities. McDonald s have discovered that people have come to prefer a world of no surprises, and therefore try to make the McDonald s experience as similar as possible, in terms of service and food. There are numerous advantages of adopting the McDonald s model. Nowadays, there is a wider availability of goods and services, which have a greater sphere of influence. It is far more convenient for the public to obtain

products and services, due to the increased number of outlets, and uniform quality of goods and services. The McDonald s model has also brought about the availability to more economic alternatives to high priced customised goods. The introduction of quantification now enables comparison to be made between goods and services, in terms of size. This society has adopted a bigger is better attitude. Finally, this new model has helped the establishment of equal treatment, regardless of race, class, or gender.

We feel that this project has explained how the McDonald's Model has become a characteristic of the contemporary global economy, and has helped create thousands of jobs and improve many economies.

Globalization v/s Internationalization?

After analyzing the marketing mix of McDonald s, it is clear that the company can be said to be ``glocal , i.e. combining elements of globalisation and internationalization. McDonald s have achieved this through applying the maxim, ``Think Global, Act Local , to all the elements of the marketing mix.

The gradual growth of McDonalds into a multi national corporation present in 120 countries can be traced using the EPRG approach- How it has incorporated each of these in its different processes and operations.

Be it an adaptation to local environment or tastes or preferences, McDonalds has done it in the best possible way. It has launched a standardized menu with a slight variation in the product offering in different countries only to make it look localized. Its restaurants the world over look similar in ambience ( as also demonstrated in our survey), its French fries taste exactly the same in Frankfurt as in Bangkok and everything looks the same except a slight variation in the price menu and the customized localized offering like an Aloo Tikki burger in India and a beef Big Mac in the USA.

McDonald s have been so successful in performing Glocalisation that they see the way forward as continuing to expand into these international markets adopting this approach. This can best be explained in utilizing the Boston Consultancy Group matrix. McDonald s reached this conclusion by the fact that in the USA, their own domestic market, they are a cash cow and have a lower market growth than in the global market. Globally, they are positioned as a star brand and have the ability to obtain a higher market growth and hence profitability.

Recommendations

1) McDonalds can introduce some Indian offerings in their outlets abroad like in US, UK etc.where there is a substantial Indian presence. Moreover in our interactions with foreigners we found that their perception about Indian menu was that it is tastier and most rated taste as a major success attribute for a fast food restaurant. The company can test the new offerings in select outlets and based on their failure/success, withdraw or launch them in other outlets as well

2) In their burger segment McDonalds has not delighted its customers for a very long time. Maybe the fast food giant needs to go one step further and bring more indianisation to its menu by offerings like omelette burgers.

3) Though most promotional schemes launched by McDonalds have so far been successful (Happy Meals etc.), it could increase its visibility by sponsoring events like college fests, conventions, seminars (official sponsor or put up stalls like Dominos/Nescafe etc.)

4) Although McDonalds have started mentioning the nutrition value of its food on to the product but still the company needs to rectify its negative image in the mind of customers in USA, UK and in other European nations.

Bibliography Books Considered for Research

Marketing Research Modern Marketing Research Marketing Research

by Kinnear and Taylor by M.N. Mishra by Beri

Web Sites Shlaes, "Lawyers Get Fat on McDonald s," Chicago Tribune, 27 November 2002. Carvalho, Brian, The Roadhouse Rocks , http://www.businesstoday.com/btoday/20040801/features4.html&SET=T

Carvalho, Brian, Small Towns, Big Business , http://www.businesstoday.com/btoday/20040718/cover1.html&SET=T Brook, Oak, Happy Birthday, Maharaja Mac! , http://www.media.mcdonalds.com/secured/products/international/maharajamac.html Lowry Miller, Karen , Hold the Fries , January 6, 2003, http://www.licenseenews.com/news/news138.html Tilson, Whitney, CEO of the Year: McDonald's Cantalupo http://www.licenseenews.com/news/news220.html Citizens Against Lawsuit Abuse, "Best of the Bizarre 02," www.calahouston.org/best02.html (13 May 2003). M.Higgins, "Senate Bill Bans Obesity Lawsuits," Washington Times, 17 July 2003; and R.Adams, "Fat Is a Financial Issue," Guardian, 27 December 2002. N.Buckley, "Restaurants Seek Cover from Obesity Lawsuits," Financial Times, 19 June 2003. D.Alexander, "Court Tosses McDonald s Health Suit; Chain Calls for Debate on Nutrition," Chicago Tribune, 5 September 2003. R.A.Daynard, L.E. Hash, and A. Robbins, "Food Litigation: Lessons from the Tobacco Wars," Journal of the American Medical Association 288, no. 17 (2002): 2179. J.Leake and A. Porter, "Burgers Are as Addictive as Drugs," Sunday Times (U.K.), 13 July 2003. S.Avery, "Is Big Fat the Next Big Tobacco?" Raleigh News and Observer, 18 August 2002. E.Schlosser, Fast Food Nation: The Dark Side of the All-American Meal (New York: HarperCollins, 2002). D.Cohen, "McDonald s Courts Health Crowd with New Products," Reuters Health, 10 March 2003. Schlosser, Fast Food Nation; M.Nestle, Food Politics: How the Food Industry Manipulates What We Eat to the Detriment of Our Health (Berkeley: University of California Press, 2002); and G.Critser, Fatland: How Americans Became the Fattest People in the World (New York: Houghton Mifflin, 2002). McDonald s Corporation, "McDonald s Reports Global Results for 2002," Press Release, 23 January 2003, www.media.mcdonalds.com/secured/news/pressreleases/2003/Press_Release01232003.html (21 August 2003). D.Cohen, "McDonald s Posts Twelfth Straight Monthly Sales Drop," Reuters Health, 12 March 2003; and McDonald s Corporation, "McDonald s Reports March and First Quarter 2003 Sales," Press Release, 10 April 2003, www.mcdonalds.com/corporate/press/financial/2003/04102003/index.html (21 August 2003).

Annexures

Company Contacts

[pic]

[pic]

[pic] ----------------------[1] Source : http://www.mcdonalds.com/corp/about.html

----------------------Secondary Data Collection Pilot Survey Company Contact

Consumer Survey Analysis Summary

Preliminary Information Gathering Identification of objectives

MIB 2nd Semester Department of Commerce Delhi School of Economics

University of Delhi.

Executive Summary

30,000 Restaurants

121 Countries

The SLEPT Approach

Consumer )*+,no ''

9 J L V W i | ~

q r

Survey to Study Perceptions

Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary

International business-level strategy Multidomestic strategy Global strategy Transnational strategy

Increased market size Return on investment Economies of scale and learning Advantage in location

Identify International Opportunities

Explore Resources and Capabilities

Use Core Competence

International Strategies

Modes of Entry

RESTRAINING FORCES

Culture Market Differences Costs National Controls Nationalism War Management Myopia Organization History Domestic Focus

DRIVING FORCES

Technology Culture Market Needs Cost Free Markets Economic Integration Peace Management Vision Strategic Intent Global Strategy and Action

Licensing

Franchising

Strategic Alliances

Joint Ventures )

Ethno

Poly

Regio

Geo

Strategy

Inter-

dependence

Multi-Domestic

International

Global

Transnational

Low

Moderate

High

Very high

Costs of

Control

Low

Moderate

High

Very high

Philosophy

Polycentric

Regiocentric

Ethnocentric

Geocentric

Licensing

Franchising

Strategic Alliances

Joint Ventures )

The Consumer Perception towards McDonald s Vis '' a '' Vis in their home country and India.

HIGH

LOW

HIGH

LOW

BRAND

QUALITY

CHICAGO

LAGOS