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McDonald's   in India - centrum - global mba vi - jose morales morales
 

McDonald's in India - centrum - global mba vi - jose morales morales

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International Marketing - Analysis of the strategy used by McDonald's to enter India.

International Marketing - Analysis of the strategy used by McDonald's to enter India.

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  • The contemporary Indian society can be understood on the basis of a 70/30 dynamic. While 70% of Indians are still traditional, poor, and live in rural areas, 30% of Indians (more than 300 million people) have emerged as rich, modern, Western-exposed, English speakers, urban dwellers.In Indian’s metropolitan cities, the young and rich have embraced the spirit of US culture, US has come to be associated with success, productivity and good life.The growing popularity of Western pop culture, MTV, Hollywood movies and US-type fast food are all part of this new social acceptance of the urban-based Indian rich and middle class
  • McDonald’s has partnered with:Bharat Petroleum Corporation Ltd., to set up restaurants at the latter’s petrol station in and around Delhi to make it more convenient for automobile-driving consumers.Delhi’s railway station and bus station, aiming to lower middle class.McDonald’s has also set up drive-through outlets in Delhi and Mumbai and along national highways , to tap automobile driving consumers, business travelers and tourism.McDonald’s has set up outlets at shopping malls and new multiplex in metros like Delhi and Mumbai, in order to tap into the business of shopping mall and film- going customers.
  • McDonald’s has been able to get a larger share of rich and upper-middleclass population, it has not been successful at effectively tapping the middle-class and lower middle-calls segments, due to prices are always a sensitive issue.McDonald’s strategy has been to increase sales volume of its products by making it products available at an affordable price. They started cutting off some prices and offering value meals in a range of prices: Rs29, Rs39, Rs49, Rs59, Rs79 and Rs89.The goal of this was to bring the customer in initially and provide a range of entry-level product so that they can try new items and graduate to the higher rungs.
  • McDonald’s has been able to get a larger share of rich and upper-middleclass population, it has not been successful at effectively tapping the middle-class and lower middle-calls segments, due to prices are always a sensitive issue.McDonald’s strategy has been to increase sales volume of its products by making it products available at an affordable price. They started cutting off some prices and offering value meals in a range of prices: Rs29, Rs39, Rs49, Rs59, Rs79 and Rs89.The goal of this was to bring the customer in initially and provide a range of entry-level product so that they can try new items and graduate to the higher rungs.
  • McDonald’s typically employs local people.The average of a McDonald’s restaurant in India employs more than 100 people in all kinds of positions: cashiers, cooks, managers, etc.Also every expansion also brings additional income and employment opportunities to India’s agricultural work force.
  • India’s relatively higher import duties and foreign exchange fluctuations, so McDonald’s decided early on to source its raw materials from the local suppliers to the maximum extent possible.The entire supply distribution is the responsibility of AFL Logistics Ltd, a joint venture between Airfreight and Coughlin in the U.S., and Radhakrishna Foodland (P) Ltd. In Thane, Maharashtra.Setting up a well coordinated supply chain was not easy, given India’s poor transportation and storage infrastructure, as well as its lower-quality agricultural products.Thus six years prior to the opening of its first restaurant in India, McDonald’s and its international suppliers worked together with local Indian companies to develop products that meet the rigorous quality standards McDonald’s demands. (Improving quality and increasing greater yields of agricultural products).Radhakrishna Foodland (P) Ltd., which is responsible for getting products from various suppliers and delivering products to various McDonald’s outlets, has earned an excellent reputation in maintaining a right “delivery-on-time” schedule. This is possible, because of the company’s installation of enterprise resource planning (ERP) software, which provides of what is selling where, useful to anticipate demand in each retail outlet.Radhakrishna Foodland distribution center also maintains high-quality standards in cleanliness, including personal hygiene for the drivers, packing, and checking temperatures of the food it transports to various restaurants.
  • Family was the cornerstone of the strategy.Its outlets were called McDonald’s Family Restaurants.McDonald’s provide a clean, comfortable and stress-free environment especially for working families.McDonald’s has become an attractive place for working and busy young parents on weekdays. On weekends, residents of Delhi and Mumbai bring their children to McDonald’s so that
  • It is too early to say that McDonald’s has succeeded in India. 9 years after McDonald’s first set up in India, it has yet make any net profit.Each McDonald’s store in India takes about 5 to 7 years to break even.(12-13 years in any new country).As in others parts of the world McDonald’s will continue to face opposition from religious fundamentalists, environmentalists protectionists, animal rights activists and antiglobalization protestors.

McDonald's   in India - centrum - global mba vi - jose morales morales McDonald's in India - centrum - global mba vi - jose morales morales Presentation Transcript

  • MCDONALD’S IN INDIAInternational Marketing
  • GROUP 6 José Morales
  • SITUATION PRESENTED IN THE CASE
  • INDIAN FACTS - DIVERSITY
  • INDIAN FACTS – BIG OPPORTUNITIES India added 181 million people between 1990 and 2001. India is the only country where the population willcontinue growing for the next fifty years. Most high-income Indians prefer to live in the urbanareas. Over the 70% of wealthy urban Indian consumers live inthe most populated and cosmopolitan cities in India India is part of the BRIC (annual average growth of morethan 5%, and by 2032 its GDP will be bigger thanJapan’s). High income residents are seeking variety in their choiceof foods and are willing to spend more in internationalcuisine including fast foods.
  • INDIAN FACTS - INDUSTRIAL REFORM Abolition of industrial licensing. Removal of control over capacity operation. Participation of foreign firms in new projects Privatization Price liberalization
  • INDIAN FACTS – CAPITAL MARKET REFORM Liberalization of foreign invests Access to global capital markets Rupee convertibility on current account
  • INDIAN FACTS – OTHER REFORMSTax Reform Reduction of Income tax rate. Abolition of wealth tax.Labor Market Reform Exit PolicyEXIM Policy Reform Reduction of tariff structure
  • PROBLEM(S) PRESENTED IN THE CASE
  • PROBLEMS Indian diversity. Religion/Cultural constraints. Environmental and animal activists opposed the entryof fast food (like KFC and McDonald’s). The Idea than this type of junk food destroy theecological balance and cause several behavioraldisorders because of the fatty and unhealthy foods. Perception that McDonald’s was a food for richpeople. Poor transportation and storage infrastructure. Lower-quality agricultural products.
  • INDIAN FOOD PREFERENCES
  • POSSIBLE ALTERNATIVE SOLUTIONS
  • ENTRY STRATEGY McDonald’s spent about six years in planning, extensivelyresearching Indian consumer tastes, product development andsupply change management before opening its first outlet in 1996. Emphasis on Local Management (Glocalization), “Think global, actlocal”McDonald’s, decided to set up 2 joint ventures on 50:50 basis with 2 localentrepreneurs:In Mumbai : Amit Jatia (background in real state development) ownsHardcastle Restaurants Private Limited (West and South)In Delhi: Vikram Bakshi (vegetarian with background in chemical and textilebusiness)owns Connaught Plaza Restaurant (north and east)Both (Amit and Vikram) were helpful to access bureaucracy and for buildingrelationship with government.
  • LOCATIONMcDonald’s opened its first outlets inMumbai and Delhi due to: These 2 cities have metropolitan cultureand wide Western exposure. There live the most of the Indian’s richand upper middle class inhabitants whowere aware of McDonald’s food. There were the 2 distribution centers ofMcDonalds.Due to logistics play a critical role inMcDonald’s location strategy, the first outletswere opened only within a 500Km radius ofits main distribution centers.McDonald’s also made some partnerships inorder to opened outlets besides thepetroleum stations, railway stations anddrive-through in Delhi and along nationalhighways.
  • “POLITICALLY CORRECT” STRATEGYHow to avoid hurtingreligious sensibilities ofIndian consumers?(80% Indians revere cows as sacredand 150 million of Indian Muslims donot eat pork and beef.)AdaptationMcDonald’s adapted itself tothe Indian marketintroducing a mutton-based“Maharaja Mac” in India asopposed to its flagship beef-based Big Mac.
  • GREEN SENSITIVITYA vocal group of environmentalists, raised campaigns againstjunk food, saying that McDonald’s and KFC destroy ecologicalbalance and cause behavioral disorders because of their fattyand unhealthy foods, which have excessive levels ofmonosodium glutamate. Also they said this food is anti poor.To face up this campaigns McDonald’s: Instituted a special fund to support Green movements. Has sponsored various community-related activities, such as“keep your city clean” to promote environmentalconsciousness. Adopted the slogan “We love Green”. Has sponsored and promoted several sports activities in orderto attempt a healthy lifestyle like the “Olympic Day Run”. Is focusing on fine tuning its fast food image adding healthfood options to its product.
  • CORPORATE CITIZENSHIPMcDonald’s has: Understood than “giving back” to society gain benefitsand reputation. (like community projects for the children,for example: McDonald’s Spotlight a interschoolperforming art competition). Sponsored children programs as the Millennium PuneFestival (search talents for children between 8 to 15years) in collaboration with UNESCO and Disney WorldResort. Sponsored the Pulse Polio program that aims to makeIndia polio-free country until 2005. Participated in celebrating days like World Children’sDay and in their own initiative known as the “Blue Dot”that supports educational programs for the girl child.
  • PRICING – UP SELLINGMcDonald’s strategy has been to increase salesvolume of its products by making it productsavailable at an affordable price. They startedcutting off some prices and offering value mealsin a range of prices: Rs29, Rs39, Rs49, Rs59,Rs79 and Rs89.
  • PRICING – CROSS SELLINGMcDonald’s offers different Add-Ons andBundles:
  • EMPLOYMENT OPPORTUNITYMcDonald’s typically employslocal people:• Each restaurant in Indiaemploys more than 100people: Cashiers Cooks Managers Attendants• Also every expansion bringsadditional employmentopportunities to India’sagricultural work force.
  • SUPPLY CHANGE MANAGEMENTObjectives:1) To operationalize its globallypracticed QSCV (quality, service,cleanliness and value).2) To enjoy flexibility in pricing.3) To launch a new product whennecessary.
  • FAMILY AND CHILD CENTRIC STRATEGYTo attract families, McDonald’sOffer:• A clean, comfortable andstress free environment• For young busy workingparents: A safe place forChildren to play while parentscan eat and relax.• For children: Birthdaycelebrations, cakes, candle,toys.• A meeting place for teenagers• Lounges for Senior Citizens
  • PROMOTIONS TO ENGAGE CUSTOMERS “Lucky Itch”,instant scratch-win prizes "Music Meal“,created to attractyoung adults.
  • RECOMMENDED SOLUTION
  • RECOMMENDATIONS Expand to other Cities to increment profits: Development of new distribution centers. Additional Adaptation Cost/New product development (due to differentregional preferences) Reinforce the family engagement Due to the “American Dream” is important in India, maybe they can opensome outlets near to the most important universities. Use Social Media Marketing to be in touch with Loyal Customers/Fans. Create contests to create to get consumers feedback, something similarthan Peruvian Fast Food Chain called Bembos, which created a contestcalled “Create your Bembos (Burger)”. So, each consumer is able tosubmit his own recipe and he can won a Prize if his recipe is the oneselected by the jury. Due to there is a growing fitness culture in the world, maybe, somevegetarian products could be adapted to other markets. Due to there are some places as New York, California and Florida with ahigh population of Indian immigrants , maybe, some of the productdeveloped for India could be offered there.
  • QUESTIONS