Golden Arches Case of Strategic Adaptation Dr Amit Rangnekar NMIMS
Strategic issues addressed <ul><li>Market entry in a developing country with low PCI levels </li></ul><ul><li>Evaluating m...
Case Coverage <ul><li>McDonalds International </li></ul><ul><li>Corporate Strategy </li></ul><ul><ul><li>Challenges </li><...
The Beginning… <ul><li>1954, Ray Kroc, 52, a distributor of milk shake maker- Multimixer, heads West on hearing about the ...
McDonalds-Global Fast Food powerhouse <ul><li>2004- World’s biggest marketer of fast food </li></ul><ul><li>31000 restaura...
Philosophy & Vision <ul><li>McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). </li></ul><...
Global Strategy <ul><li>Customer driven, goal oriented  </li></ul><ul><li>Achieving sustainable, profitable growth </li></...
Plan to Win <ul><li>Built around 5 key drivers of exceptional customer experiences-  People + 4Ps </li></ul><ul><li>Founde...
Operational Excellence   <ul><li>Intent on delivering exceptional experiences to 47 million customers served each day </li...
Leadership marketing <ul><li>Reconnect with customers thro’ contemporary global marketing direction  “i'm lovin' it” </li>...
Innovation <ul><li>Evolving to remain relevant to consumers </li></ul><ul><li>Variety of value, premium & wholesome menus ...
Franchising <ul><li>Always been a franchising Company  </li></ul><ul><li>Franchisees play a major role, approximately 70% ...
Financial Muscle- Y-2002-03 <ul><li>$ 41.5 billion in sales </li></ul><ul><li>$ 25.7 billion (62%)- sales of franchisees <...
Asian Presence 3653 0 0 9 103 184 114 61 233 110 157 105 140 2437 Outlets’97 68 6148 Asia $ 2 Sri Lanka 1998 $ 20 Pakistan...
Income Distribution in India 165 1 Billion Total >125000 0.006 0.03 Super Rich 50000-125000 0.02 0.14 Sheer Rich 25000-500...
Indian Market <ul><li>Huge Sub-continent </li></ul><ul><li>4 times the population of the US </li></ul><ul><li>Middle Class...
KSA Technopak Survey <ul><li>Eating out sector growing, consumer spend increasing </li></ul><ul><li>Rs 40000 Cr eating out...
Indian Market <ul><li>Size of ‘Eating Out’ market- substantial </li></ul><ul><li>India’s food expenditure- $77 Bn / world ...
Social Diversity <ul><li>20 major languages, 800+ dialects </li></ul><ul><li>50% population literate </li></ul><ul><li>Adv...
Infrastructure <ul><li>Poor roads </li></ul><ul><li>Power situation grim even in New Delhi (Capital) and Bangalore (Silico...
Political <ul><li>World’s largest democracy </li></ul><ul><li>Fairly stable governments </li></ul><ul><li>Armed Forces- Ne...
Economic <ul><li>Entry & Exits in sectors controlled by Govt </li></ul><ul><li>MNC restrictions </li></ul><ul><li>Deregula...
Pressure Groups <ul><li>Anti- Western / MNC factions </li></ul><ul><li>Health activists </li></ul><ul><li>Environmentalist...
1991- MNC Invasion <ul><li>Indian economy open to FDI </li></ul><ul><li>Huge potential </li></ul><ul><li>Over confidence <...
KFC <ul><li>1 st  Restaurant Bangalore, 1995 </li></ul><ul><li>Excessive MSG levels, outlets closed </li></ul><ul><li>Rest...
Kelloggs <ul><li>Initial High price </li></ul><ul><li>Much higher than average Indian breakfast cost + Milk </li></ul><ul>...
Reasons for failure <ul><li>Low level indigenisation, high costs </li></ul><ul><li>Lack of understanding of local tastes <...
Late Indian Entry <ul><li>Closed economy pre 1991 </li></ul><ul><li>Significant Vegetarian population </li></ul><ul><li>Li...
India  Vision  <ul><li>To be India’s &quot; best &quot; quick service restaurant experience - supported by principles and ...
Targeting Markets <ul><li>Initial focus on metros- Mumbai, Delhi </li></ul><ul><li>Relatively high incomes </li></ul><ul><...
India-Entry Strategy <ul><li>Wholly owned subsidiary- MIPL </li></ul><ul><li>Incorporated in 1993 </li></ul><ul><li>McDona...
Product Adaptation <ul><li>Asian product adaptations to local tastes </li></ul><ul><li>Burgers with Thai Basil- Thailand <...
Product Adaptation-The Indian Challenge <ul><li>Much higher degree of adaptability </li></ul><ul><li>40% Vegetarians – Veg...
Product Adaptation-The Indian Challenge <ul><li>Common Menu- Chicken Nuggets, Fillet-O- Fish, fries, sodas, shakes  </li><...
Menu Development <ul><li>1998- Menu development team </li></ul><ul><li>Consumer feedback & research findings </li></ul><ul...
Restaurant Management System (RMS) <ul><li>2 separate menus; green- veg, purple- nonveg </li></ul><ul><li>Separate veg, no...
International Standards <ul><li>India's local suppliers provide highest quality, freshest ingredients.  </li></ul><ul><li>...
Family Restaurant <ul><li>The McDonalds XP for the family </li></ul><ul><li>Focus on kids, gifts galore </li></ul><ul><li>...
Value Pricing <ul><li>Happy Meal- Small Burger,fries, coke+ toy </li></ul><ul><li>Medium Meal Combo- Burger, fries, coke- ...
Cost Control / Pricing Strategy <ul><li>“Customers attracted purely by these unsustainable but attractive low prices would...
Competitive Pricing <ul><li>KFC-  Rs 59- Rs 79 ( Burger/KFC, Drink) </li></ul><ul><li>Chicken, rice, gravy meal for Rs 39 ...
Widening the Customer Base <ul><li>Surveys indicated “Perceived as Premium” </li></ul><ul><li>Ensure trials thro’ selectiv...
<ul><li>Children’s painting competition across cities </li></ul><ul><li>Maintaining gardens, parks, heritage structures </...
Marketing Strategy <ul><li>Promotional strategy to convey world class xp, Indian adaptations, freshness, nutrition & value...
Get Lucky- Promotional scheme <ul><li>Collaboration with Coke, MTV, Hungama.com, Sony Music & GM </li></ul><ul><li>Scratch...
Promo Spends <ul><li>June’00- Rs 10 Crore </li></ul><ul><li>March’01- Rs 20 Crore- Doubled </li></ul><ul><li>March’02- Rs ...
Target Markets <ul><li>Only  < 10%  population-  possible target market  </li></ul><ul><li>“ We want to first concentrate ...
Supply Chain  <ul><li>Critical for success </li></ul><ul><li>Local network for supply chain & distribution </li></ul><ul><...
Cold Chain <ul><li>Integral to Supply Chain </li></ul><ul><li>Network- Food procurement, warehousing, transportation and r...
Supply Chain <ul><li>Trikaya Agriculture  –  </li></ul><ul><li>Supplier of Iceberg Lettuce </li></ul><ul><li>Advanced agri...
Supply Chain <ul><li>Vista Processed Foods </li></ul><ul><li>JV of OSI Industries-US & McDonald's-India </li></ul><ul><li>...
Supply Chain <ul><li>Dynamix Diary , Baramati </li></ul><ul><li>Supplier of Cheese  </li></ul><ul><li>Capability to conver...
Supply Chain <ul><li>Amrit Food  </li></ul><ul><li>Milk and Milk Products for Frozen Desserts </li></ul><ul><li>Installed ...
Supply Chain <ul><li>Radhakrishna Foodland  </li></ul><ul><li>Distribution Centre- Specialises in handling large volumes, ...
Supply Chain <ul><li>Cremica   Industries , Philaur, Punjab- </li></ul><ul><li>Working with McDonald's European suppliers ...
Dilemma <ul><li>“ In some cases, Indian suppliers had the technology - but no market for the products they produced beside...
Geographically diverse sourcing <ul><li>Buns from North </li></ul><ul><li>Chicken & Cheese from West </li></ul><ul><li>Fis...
Local Sourcing <ul><li>Committed to local sourcing from suppliers and farmers.  </li></ul><ul><li>Restaurants constructed ...
Distribution <ul><li>Dedicated </li></ul><ul><li>Matching supplier production with deliveries to meet schedules & restaura...
<ul><li>Interaction with suppliers & logistic firms to ensure optimum stocking </li></ul><ul><li>QIP (Quality Inspection P...
<ul><li>Logistics to move RM to restaurants </li></ul><ul><li>AFL logistics- 50:50 JV between AirFreight & FX Coughlin of ...
Inculcating a Service Orientation <ul><li>Physical logistics important to retain food freshness </li></ul><ul><li>“ The tr...
An Employer Of Opportunity <ul><li>Employer of opportunity, providing quality employment and long-term careers to the Indi...
Export Base <ul><li>Indian Cheese & Lettuce exported- Sri Lanka, Hong Kong & UAE </li></ul><ul><li>Plans to export to Russ...
Past Performance 51 Nov 2003 46 Dec2000 13 Del, 10 Mum,  Pune, Jaipur 25 Mid 2000 8 Del,6 Mum 14 End 1998 <ul><li>6 Millio...
Indian XP <ul><li>In 1997 consumers classified food as bland </li></ul><ul><li>By 2000, it was sought for its taste </li><...
Growth Strategies <ul><li>Increasing seating capacity </li></ul><ul><li>Adding Birthday party areas </li></ul><ul><li>Ente...
Points to Ponder <ul><li>Would customer profile on highways & railway stations be appropriate </li></ul><ul><li>Would they...
CEO Speak <ul><li>“  Meticulous planning went in before opening a restaurant.  It took us 6 years to open our first outlet...
The Compliment <ul><li>“ McDonald’s products sold in India have been Indianised & produced in accordance with Indian taste...
MIPL- points to ponder <ul><li>Investment / outlet excluding real estate- Rs 3 Cr </li></ul><ul><li>Jun 2003, 50 outlets, ...
Urban Indian Fast Food Market-03 (Estimated 1500 Cr)
MCIL Today <ul><li>“ We’ve established ourselves firmly in the mind of the consumer. Now is the time to expand and extend ...
<ul><li>Reaching Out </li></ul><ul><li>Gunning for  volumes  through  home delivery </li></ul><ul><li>Extend reach at  hom...
Home Delivery <ul><li>Home delivery in  Mumbai  &  Delhi  outlets to areas within 15 minutes </li></ul><ul><li>Extreme act...
Increasing Operational Excellence <ul><li>Footfalls up 25% per outlet per day </li></ul><ul><li>“ We’ve reached a stage wh...
Strategic Analysis <ul><li>SWOT </li></ul><ul><li>Trend Analysis </li></ul>Performance Key Uncertainties Key  Certainties
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McDonalds India launch

  1. 1. Golden Arches Case of Strategic Adaptation Dr Amit Rangnekar NMIMS
  2. 2. Strategic issues addressed <ul><li>Market entry in a developing country with low PCI levels </li></ul><ul><li>Evaluating market attractiveness </li></ul><ul><li>Strategic insight into a consummate global marketer </li></ul><ul><li>Compatibility between product adaptation & local responsiveness (on the one hand) & a global strategy on the other hand </li></ul><ul><li>Critical assessment of future strategic options, namely aggressive expansion when the operations are yet to attain profitability </li></ul><ul><li>Framework for assessing Industry / Market attractiveness </li></ul>
  3. 3. Case Coverage <ul><li>McDonalds International </li></ul><ul><li>Corporate Strategy </li></ul><ul><ul><li>Challenges </li></ul></ul><ul><ul><li>Attractiveness </li></ul></ul><ul><ul><li>Strategies- Country Business Plan </li></ul></ul><ul><ul><li>SCM </li></ul></ul><ul><ul><li>CSR </li></ul></ul><ul><li>Marketing Strategy </li></ul><ul><li>Branding, Pricing, Promotion, Distribution </li></ul><ul><li> STPD </li></ul><ul><li> Product Adaptation </li></ul><ul><li>Performance </li></ul><ul><li>Future Plans </li></ul><ul><li>Issues & Realities </li></ul>
  4. 4. The Beginning… <ul><li>1954, Ray Kroc, 52, a distributor of milk shake maker- Multimixer, heads West on hearing about the McDonald Bros hamburger stand in California </li></ul><ul><li>Seizing the opportunity, he pitched the idea of opening up several restaurants to the McDonald brothers, to sell 8 of his Multimixers to each and every one. </li></ul><ul><li>&quot;Who could we get to open them for us?&quot; they asked &quot;Well,&quot; Kroc answered, &quot;what about me?&quot; </li></ul>
  5. 5. McDonalds-Global Fast Food powerhouse <ul><li>2004- World’s biggest marketer of fast food </li></ul><ul><li>31000 restaurants </li></ul><ul><li>120 countries </li></ul><ul><li>47 million customers per day </li></ul><ul><li>Ronald McDonald, introduced 1963, second only to Santa Claus in terms of recognition </li></ul>
  6. 6. Philosophy & Vision <ul><li>McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). </li></ul><ul><li>&quot; We take the burger business more seriously than anyone else &quot; Ray Kroc </li></ul><ul><li>&quot; If you've got time to lean, you've got time to clean &quot; Ray Kroc </li></ul>
  7. 7. Global Strategy <ul><li>Customer driven, goal oriented </li></ul><ul><li>Achieving sustainable, profitable growth </li></ul><ul><li>Designed to increase restaurant visits and grow brand loyalty among new & existing customers </li></ul><ul><li>Further build financial strength </li></ul>
  8. 8. Plan to Win <ul><li>Built around 5 key drivers of exceptional customer experiences- People + 4Ps </li></ul><ul><li>Founded on the belief of 3 success components </li></ul><ul><li>Operational Excellence </li></ul><ul><li>Leadership Marketing </li></ul><ul><li>Innovation </li></ul>
  9. 9. Operational Excellence <ul><li>Intent on delivering exceptional experiences to 47 million customers served each day </li></ul><ul><li>Implement restaurant-specific review policies to identify opportunities to improve QSCV </li></ul><ul><li>Independent mystery shoppers to evaluate performance & give a customer's perspective </li></ul><ul><li>Improve speed of service and efficiency </li></ul><ul><li>Better kitchen organization, front counter and drive-thru areas </li></ul><ul><li>Emphasize hospitality, accuracy and cleanliness Simplify the restaurant environment </li></ul>
  10. 10. Leadership marketing <ul><li>Reconnect with customers thro’ contemporary global marketing direction “i'm lovin' it” </li></ul><ul><li>“ i'm lovin' it” reflects an attitude we want our employees to embrace & reflect in their service </li></ul><ul><li>Maximize ad spend impact </li></ul><ul><li>Broaden reach through PR </li></ul><ul><li>Deliver global brand message through ads, packaging and restaurant experiences </li></ul><ul><li>Emphasis on building sales at existing restaurants rather than adding new ones. </li></ul>
  11. 11. Innovation <ul><li>Evolving to remain relevant to consumers </li></ul><ul><li>Variety of value, premium & wholesome menus </li></ul><ul><li>giving more customers more reasons to visit </li></ul><ul><li>Expanded Happy Meal choices to attract & retain customers </li></ul><ul><li>Educating people about healthy, active lifestyles, premium Salads < 10 gm fat </li></ul><ul><li>Wi-fi accessibility when enjoying a Big Mac XP </li></ul><ul><li>400 McCafés in 23 countries serving premium & specialty coffees, cakes, pastries inside existing McDonald's restaurants </li></ul>
  12. 12. Franchising <ul><li>Always been a franchising Company </li></ul><ul><li>Franchisees play a major role, approximately 70% of McDonald's businesses are owned and operated by independent franchisees </li></ul><ul><li>McDonald's remains committed to franchising </li></ul>
  13. 13. Financial Muscle- Y-2002-03 <ul><li>$ 41.5 billion in sales </li></ul><ul><li>$ 25.7 billion (62%)- sales of franchisees </li></ul><ul><li>$ 2.1 billion operating profit </li></ul><ul><li>$ 893 million Net profit </li></ul><ul><li>Assets- $ 24 billion </li></ul><ul><li>8 th Most valuable brand in the world, ahead of Sony, Nokia, Toyota in 1999 </li></ul><ul><li>Among Top 100 companies worldwide in 2000 </li></ul>
  14. 14. Asian Presence 3653 0 0 9 103 184 114 61 233 110 157 105 140 2437 Outlets’97 68 6148 Asia $ 2 Sri Lanka 1998 $ 20 Pakistan 1998 411 46 India 1996 2 105 Indonesia 1991 197 546 China 1990 213 357 South Korea 1988 64 100 Thailand 1985 50 350 Taiwan 1984 49 149 Malaysia 1981 50 236 Philippines 1980 24 130 Singapore 1979 54 216 HK 1975 60 3891 Japan 1971 % Change Outlets’02 Country Entry
  15. 15. Income Distribution in India 165 1 Billion Total >125000 0.006 0.03 Super Rich 50000-125000 0.02 0.14 Sheer Rich 25000-50000 0.07 0.44 Clear Rich 12500-25000 0.25 1.55 Near Rich >12500 0.35 2.18 Rich Total 6000-12500 5 25 Strivers 3000-6000 8 45 Climbers 1000-3000 20 120 Aspirants <600 131 763 Deprived Household Income $ US Household (Mn) People (Mn) Classification
  16. 16. Indian Market <ul><li>Huge Sub-continent </li></ul><ul><li>4 times the population of the US </li></ul><ul><li>Middle Class estimated at 300 Million </li></ul><ul><li>Per Capita GDP $ 400- but at PPP- $2540 </li></ul><ul><li>4 th largest economy- ahead of France, Russia,UK, Asia’s 3 rd largest-Behind China & Japan (PPP) </li></ul>
  17. 17. KSA Technopak Survey <ul><li>Eating out sector growing, consumer spend increasing </li></ul><ul><li>Rs 40000 Cr eating out market growing @ 6% </li></ul><ul><li>Rs 1500 Cr urban fast food segment growing @ 20% </li></ul><ul><li>“ McDonald’s is not a substitute for Indian food, it’s just one more option for people to exercise.” </li></ul><ul><li>Local taste preference- “Indians want a slice of America, but only once in a while. Inflexibility in their product mix could be their undoing.” </li></ul>
  18. 18. Indian Market <ul><li>Size of ‘Eating Out’ market- substantial </li></ul><ul><li>India’s food expenditure- $77 Bn / world $ 4000 Bn (2%) </li></ul><ul><li>Highly fragmented food market </li></ul><ul><li>Millions of roadside stalls / carts- major market share </li></ul><ul><li>Udipi, Sandwich, PavBhaji, Chaats, Chinese, Namkeens, Pizza </li></ul><ul><li>Organised chains- Narula’s, Wimpys, Udipis </li></ul>
  19. 19. Social Diversity <ul><li>20 major languages, 800+ dialects </li></ul><ul><li>50% population literate </li></ul><ul><li>Advertising-Billboards, Print , Electronic </li></ul><ul><li>8 languages for National launch </li></ul>
  20. 20. Infrastructure <ul><li>Poor roads </li></ul><ul><li>Power situation grim even in New Delhi (Capital) and Bangalore (Silicon Valley) </li></ul>
  21. 21. Political <ul><li>World’s largest democracy </li></ul><ul><li>Fairly stable governments </li></ul><ul><li>Armed Forces- Neutral </li></ul><ul><li>Bureaucratic red tape omnipresent </li></ul>
  22. 22. Economic <ul><li>Entry & Exits in sectors controlled by Govt </li></ul><ul><li>MNC restrictions </li></ul><ul><li>Deregulation since 1991 but socialist / swadeshi mindset continues </li></ul><ul><li>MPs comment on MNC in consumer sector </li></ul><ul><li>“ We want computer chips, not potato chips ” </li></ul>
  23. 23. Pressure Groups <ul><li>Anti- Western / MNC factions </li></ul><ul><li>Health activists </li></ul><ul><li>Environmentalists </li></ul><ul><li>Animal welfare activists </li></ul><ul><li>Sons of the soil campaigners </li></ul>
  24. 24. 1991- MNC Invasion <ul><li>Indian economy open to FDI </li></ul><ul><li>Huge potential </li></ul><ul><li>Over confidence </li></ul><ul><li>Faulty Market Research inputs cost dear </li></ul><ul><li>Major failures, Peugeot closed shop </li></ul><ul><li>Repositioning & price reduction helped </li></ul><ul><li>Lack of demand </li></ul>
  25. 25. KFC <ul><li>1 st Restaurant Bangalore, 1995 </li></ul><ul><li>Excessive MSG levels, outlets closed </li></ul><ul><li>Restaurant ransacked –1996 </li></ul><ul><li>Business closed for long periods </li></ul><ul><li>No major expansions </li></ul>
  26. 26. Kelloggs <ul><li>Initial High price </li></ul><ul><li>Much higher than average Indian breakfast cost + Milk </li></ul><ul><li>No off take </li></ul><ul><li>Targeted at family than kids </li></ul><ul><li>Old habits took very long to change </li></ul>
  27. 27. Reasons for failure <ul><li>Low level indigenisation, high costs </li></ul><ul><li>Lack of understanding of local tastes </li></ul><ul><li>Over estimation of demand potential </li></ul><ul><li>Rosy assumptions- Speedy bureaucratic clearances </li></ul><ul><li>Infrastructural inadequacies </li></ul><ul><li>Inappropriate strategies- Pricing </li></ul>
  28. 28. Late Indian Entry <ul><li>Closed economy pre 1991 </li></ul><ul><li>Significant Vegetarian population </li></ul><ul><li>Limited purchasing power </li></ul>
  29. 29. India Vision <ul><li>To be India’s &quot; best &quot; quick service restaurant experience - supported by principles and core values </li></ul>
  30. 30. Targeting Markets <ul><li>Initial focus on metros- Mumbai, Delhi </li></ul><ul><li>Relatively high incomes </li></ul><ul><li>Exposure to western food & culture </li></ul><ul><li>Move to smaller satellite towns (Gurgaon, Pune) </li></ul><ul><li>Positive spillover effects of reputation </li></ul><ul><li>Jaipur & Agra- To attract foreign tourists </li></ul>
  31. 31. India-Entry Strategy <ul><li>Wholly owned subsidiary- MIPL </li></ul><ul><li>Incorporated in 1993 </li></ul><ul><li>McDonald's opened its doors in India in Vasant Vihar, New Delhi in October 1996 </li></ul><ul><li>Entered into two 50:50 JVs with Connaught Plaza Restaurants-Vikram Bakshi- North & Hardcastle Restaurants-Amit Jatia- West </li></ul><ul><li>Trained extensively, along with their Indian management team, in McDonald's in Indonesia and the US before launch </li></ul>
  32. 32. Product Adaptation <ul><li>Asian product adaptations to local tastes </li></ul><ul><li>Burgers with Thai Basil- Thailand </li></ul><ul><li>Teriyaki Burger- Japan </li></ul><ul><li>Rice dishes- Indonesia </li></ul>
  33. 33. Product Adaptation-The Indian Challenge <ul><li>Much higher degree of adaptability </li></ul><ul><li>40% Vegetarians – Vegetarian selections to suit Indian taste </li></ul><ul><li>Maharaja Mac replaced Big Mac, Chicken Patty instead of Beef </li></ul><ul><li>Respect for local culture- Special Indian menu, No beef or pork items in India </li></ul><ul><li>McAloo burger, Veg Salad Sandwich, McMasala & McImli sauces </li></ul>
  34. 34. Product Adaptation-The Indian Challenge <ul><li>Common Menu- Chicken Nuggets, Fillet-O- Fish, fries, sodas, shakes </li></ul><ul><li>Garlic free sauces to get in “hard core” vegetarian customers </li></ul><ul><li>Re-formulated own products using spices favoured by Indians </li></ul><ul><li>Eggless sandwich sauces, Soft serves & McShakes </li></ul><ul><li>Freshest chicken, fish and vegetable products </li></ul><ul><li>Only vegetable oil used as a cooking medium </li></ul>
  35. 35. Menu Development <ul><li>1998- Menu development team </li></ul><ul><li>Consumer feedback & research findings </li></ul><ul><li>Do not entirely localise menu </li></ul><ul><li>Wider product range </li></ul><ul><li>More Hot food </li></ul><ul><li>Low entry level prices </li></ul><ul><li>Veg Pizza McPuff </li></ul><ul><li>India-75% localised menu, 33% in Asian countries, Other countries < 5% </li></ul>
  36. 36. Restaurant Management System (RMS) <ul><li>2 separate menus; green- veg, purple- nonveg </li></ul><ul><li>Separate veg, nonveg kitchens with dedicated staff , preparation and wrapping areas </li></ul><ul><li>Different uniforms for kitchen crew to distinguish roles </li></ul><ul><li>Clear segregation: Kitchen staff </li></ul><ul><li>Printed brochures of RMS to customers </li></ul><ul><li>Customer kitchen tours to assure </li></ul>
  37. 37. International Standards <ul><li>India's local suppliers provide highest quality, freshest ingredients. </li></ul><ul><li>Adherence to Indian Government regulations on food, health and hygiene, benchmarking with own international standards. </li></ul><ul><li>Fast, friendly service - the hallmark of McDonald's restaurants world over </li></ul><ul><li>Stringent cleaning standards, trays sanitised several times each hour. </li></ul><ul><li>Meticulous attention to cleanliness beyond lobby,kitchen to pavement & area outside </li></ul>
  38. 38. Family Restaurant <ul><li>The McDonalds XP for the family </li></ul><ul><li>Focus on kids, gifts galore </li></ul><ul><li>High chair concept </li></ul><ul><li>Brightly lit, casual, comfortable & contemporary look </li></ul><ul><li>Friendly, smiling, fast service </li></ul><ul><li>Emphasis on cleanliness </li></ul>
  39. 39. Value Pricing <ul><li>Happy Meal- Small Burger,fries, coke+ toy </li></ul><ul><li>Medium Meal Combo- Burger, fries, coke- Veg Rs 75, Maharaja Mac meal- Rs 94 </li></ul><ul><li>Family dines under Rs 300 (2003) </li></ul><ul><li>Pricing lower than Pak, SL, 50% lesser than US </li></ul>
  40. 40. Cost Control / Pricing Strategy <ul><li>“Customers attracted purely by these unsustainable but attractive low prices would not pay repeat visits” </li></ul><ul><li>Development of a low cost supply chain – crucial enabling factor </li></ul>
  41. 41. Competitive Pricing <ul><li>KFC- Rs 59- Rs 79 ( Burger/KFC, Drink) </li></ul><ul><li>Chicken, rice, gravy meal for Rs 39 </li></ul><ul><li>Pizza Hut- Family meal (2 medium pizzas, Pepsi- Rs 350 </li></ul><ul><li>Wimpys- Mega meals starting @ Rs 35 </li></ul><ul><li>McDonalds- Value meals @ 39, Quick bites @ 25, Soft serve ice creams @ Rs 8 </li></ul><ul><li>Even these low prices afforded a 40% margin </li></ul><ul><li>‘ I will never become unaffordable, as I’ll then not be able to generate volumes” Vikram Bakshi </li></ul>
  42. 42. Widening the Customer Base <ul><li>Surveys indicated “Perceived as Premium” </li></ul><ul><li>Ensure trials thro’ selective price cutting & periodic promotions </li></ul><ul><li>Harness the prosperity & feel-good-factor around festivals across regions & religions </li></ul>
  43. 43. <ul><li>Children’s painting competition across cities </li></ul><ul><li>Maintaining gardens, parks, heritage structures </li></ul><ul><li>Effluent treatments, Pulse Polio, recyclable paper bags </li></ul><ul><li>‘ Litter Patrols’ to ensure a cleaner neighbourhood. </li></ul><ul><li>Huge donations to Latur/ Bhuj / Gujarat earthquakes </li></ul><ul><li>Co-Sponsor of Inter-School Science Quiz Competition. </li></ul><ul><li>2002, tie up with Nalanda Foundation - education of the underprivileged Girl-Child. </li></ul>Community Partnership / CSR
  44. 44. Marketing Strategy <ul><li>Promotional strategy to convey world class xp, Indian adaptations, freshness, nutrition & value </li></ul><ul><li>Shift from worldwide positioning of drive-in convenience and speedy service </li></ul><ul><li>Segment- The Young family (<30 years) </li></ul><ul><li>Target- The young family who eats out </li></ul><ul><li>Focus- Attracting children, so family follows </li></ul><ul><li>Positioning- ‘ McDonalds mein hai kuch baat’ – </li></ul><ul><li>a place for the entire family to enjoy </li></ul><ul><li>Differentiation- highlighting brand, food & variety </li></ul><ul><li>Happy meal film on Cartoon Network, Zee </li></ul><ul><li>Special promotions during festivals </li></ul>
  45. 45. Get Lucky- Promotional scheme <ul><li>Collaboration with Coke, MTV, Hungama.com, Sony Music & GM </li></ul><ul><li>Scratch cards on Large combo meals </li></ul><ul><li>Prizes- caps, tshirts, CDs, internet cards, free tickets to a Lucky Ali contest </li></ul><ul><li>Purchase of a 2 nd meal in a month qualifies for- Opel Corsa / NZ trip </li></ul><ul><li>Snags- Neither Lucky Ali contest materialised nor Corsa nor NZ trip- issues of credibility </li></ul>
  46. 46. Promo Spends <ul><li>June’00- Rs 10 Crore </li></ul><ul><li>March’01- Rs 20 Crore- Doubled </li></ul><ul><li>March’02- Rs 18 Crore </li></ul><ul><li>March’03- Rs 24 Crore </li></ul><ul><li>Emphasis on generating repeat visits </li></ul><ul><li>Positioning changes from </li></ul><ul><li>“ McDonalds mein hai kuch baat” to </li></ul><ul><li>“ To aaj McDonalds ho jaaye ” </li></ul><ul><li>A Shift from ‘ special ’ to ‘ acceptable and enjoyable ’ </li></ul><ul><li>McDonalds positioned as a comfort zone for young families </li></ul>
  47. 47. Target Markets <ul><li>Only < 10% population- possible target market </li></ul><ul><li>“ We want to first concentrate on metros, then open branches in other cities. We want to set up outlets only in cities where we can ensure the quality of products” Vikram Bakshi </li></ul><ul><li>Phase I- Focus on cities of relatively high incomes where citizens are exposed to western food & culture </li></ul><ul><li>Phase II- Move to smaller satellite towns (Gurgaon, Pune)- Positive spillover effect of reputation </li></ul><ul><li>Jaipur & Agra- To attract foreign tourists </li></ul><ul><li>Phase III- Malls, Multiplexes, Highways, Stations & Airports </li></ul><ul><li>No plans for South, East, Goa? </li></ul>
  48. 48. Supply Chain <ul><li>Critical for success </li></ul><ul><li>Local network for supply chain & distribution </li></ul><ul><li>Local suppliers, distributors to match international quality </li></ul><ul><li>Operations & training to match international quality and hygiene standards </li></ul><ul><li>Invested Rs 50 crore in setting up, before opening 1 st outlet </li></ul><ul><li>By 2000- Investment in supply chain – Rs 300 Crore </li></ul>
  49. 49. Cold Chain <ul><li>Integral to Supply Chain </li></ul><ul><li>Network- Food procurement, warehousing, transportation and retailing under controlled temperatures </li></ul><ul><li>Cold Chain cuts down on operational wastage </li></ul><ul><li>Necessary to maintain food temperatures to retain their freshness and nutritional value. </li></ul><ul><li>Products to be used on a daily basis, stored within a temperature range of –18ºC to 4ºC. </li></ul><ul><li>52% food products need to be stored under these conditions before they are used. </li></ul>
  50. 50. Supply Chain <ul><li>Trikaya Agriculture – </li></ul><ul><li>Supplier of Iceberg Lettuce </li></ul><ul><li>Advanced agricultural practices enabled specialty crops like iceberg lettuce, special herbs and many oriental vegetables. </li></ul><ul><li>Farm infrastructure - Specialised nursery, agricultural experts, pre-cooling room, cold room for handling, refrigerated truck for transportation. </li></ul>
  51. 51. Supply Chain <ul><li>Vista Processed Foods </li></ul><ul><li>JV of OSI Industries-US & McDonald's-India </li></ul><ul><li>Range of frozen chicken & vegetable foods at world class infrastructure plant at Taloja, Maharashtra. </li></ul><ul><li>Separate processing lines for chicken and vegetable foods </li></ul><ul><li>Capability to produce frozen foods even at -35 Degree C temperature to retain total freshness. </li></ul>
  52. 52. Supply Chain <ul><li>Dynamix Diary , Baramati </li></ul><ul><li>Supplier of Cheese </li></ul><ul><li>Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein, whey protein and humanised baby food </li></ul><ul><li>Supplier to McDonalds & Nestle </li></ul>
  53. 53. Supply Chain <ul><li>Amrit Food </li></ul><ul><li>Milk and Milk Products for Frozen Desserts </li></ul><ul><li>Installed capacity of 6000 lit / hour for producing homogenised UHT (Ultra High Temperature) processed milk and milk products. </li></ul>
  54. 54. Supply Chain <ul><li>Radhakrishna Foodland </li></ul><ul><li>Distribution Centre- Specialises in handling large volumes, provide entire range of services like procurement, quality inspection, storage, inventory management, deliveries, data collection, recording & reporting. </li></ul><ul><li>Effective process control for minimum distribution cost </li></ul><ul><li>1-stop shop for food distribution management services. </li></ul><ul><li>Dry / cold storage facility to store/transport perishables at temperatures up to - 22 C </li></ul>
  55. 55. Supply Chain <ul><li>Cremica Industries , Philaur, Punjab- </li></ul><ul><li>Working with McDonald's European suppliers to develop technology & expertise allowed Cremica to expand businesses from baking to provide breading & batters to McDonald's India & other companies. </li></ul>
  56. 56. Dilemma <ul><li>“ In some cases, Indian suppliers had the technology - but no market for the products they produced besides McDonalds” </li></ul>
  57. 57. Geographically diverse sourcing <ul><li>Buns from North </li></ul><ul><li>Chicken & Cheese from West </li></ul><ul><li>Fish, Lettuce & Pickles from South </li></ul><ul><li>98% paper, locally sourced </li></ul><ul><li>French fries imported from Indonesia </li></ul><ul><li>40 suppliers in the chain </li></ul>
  58. 58. Local Sourcing <ul><li>Committed to local sourcing from suppliers and farmers. </li></ul><ul><li>Restaurants constructed using local architects, contractors, labour and maximum local material content </li></ul><ul><li>Relationship mutually beneficial as supplier gets opportunity to expand business, access to latest technology, exposure to advanced practices and the ability to grow or export. </li></ul>
  59. 59. Distribution <ul><li>Dedicated </li></ul><ul><li>Matching supplier production with deliveries to meet schedules & restaurant needs </li></ul><ul><li>2 centralised distribution centers at Mumbai & Kochi, each capable of catering to 25 outlets </li></ul><ul><li>Aim to enhance quality of storage operations </li></ul><ul><li>Emphasis on economies of scale-storage volumes high </li></ul>
  60. 60. <ul><li>Interaction with suppliers & logistic firms to ensure optimum stocking </li></ul><ul><li>QIP (Quality Inspection Program)- Quality checks at 20 points in the supply chain movement </li></ul><ul><li>HACCP (Hazard Analysis Critical Control Point) Food safety standards emphasizing prevention of faults than detection thro inspection </li></ul><ul><li>“ With a Cold Chain in place, there is practically no need for a knife in the restaurant. Chopping & food processing is done in the plants. Restaurants are confined to only the actual cooking” Amit Jatia </li></ul>Distribution
  61. 61. <ul><li>Logistics to move RM to restaurants </li></ul><ul><li>AFL logistics- 50:50 JV between AirFreight & FX Coughlin of USA- McDonalds international logistics partner </li></ul><ul><li>AFL responsible for temperature-controlled movement of all products from suppliers to distribution centers </li></ul>Distribution
  62. 62. Inculcating a Service Orientation <ul><li>Physical logistics important to retain food freshness </li></ul><ul><li>“ The truck drivers had to be explicitly and specifically conveyed not to switch off the truck’s ignition to save on fuel & electricity as the refrigeration system also automatically shuts off. We installed trapping devices to log temperature charts through the entire journey” Amit Jatia </li></ul>
  63. 63. An Employer Of Opportunity <ul><li>Employer of opportunity, providing quality employment and long-term careers to the Indian people. </li></ul><ul><li>Average McDonald's restaurant employs 60-80 people from crew to restaurant manager. </li></ul><ul><li>World class-training inputs to 2000 employees in Mumbai and Delhi annually. </li></ul>
  64. 64. Export Base <ul><li>Indian Cheese & Lettuce exported- Sri Lanka, Hong Kong & UAE </li></ul><ul><li>Plans to export to Russia, EU, SE Asia </li></ul><ul><li>“ Things are becoming global in nature. Once you set up a supply chain in a strategic location, it can service other countries as well.” Amit Jatia </li></ul>
  65. 65. Past Performance 51 Nov 2003 46 Dec2000 13 Del, 10 Mum, Pune, Jaipur 25 Mid 2000 8 Del,6 Mum 14 End 1998 <ul><li>6 Million customers (2002) </li></ul><ul><li>3.5 Lacs Maharaja Macs </li></ul><ul><li>50% revenues from veg menu </li></ul><ul><li>40000 customers daily (2003) </li></ul><ul><li>No of transactions grow @ 15% </li></ul><ul><li>Average spend / customer Rs 45 (2002) </li></ul>4 Del, 3 Mum 7 First 12 months Milestones Place Out lets Period
  66. 66. Indian XP <ul><li>In 1997 consumers classified food as bland </li></ul><ul><li>By 2000, it was sought for its taste </li></ul><ul><li>Most popular- </li></ul><ul><li>Veg pizza Mcpuffs (Samosa + Pizza ingredients) </li></ul><ul><li>Chicken Mcgrill (with extra tangy Indian spices) </li></ul>
  67. 67. Growth Strategies <ul><li>Increasing seating capacity </li></ul><ul><li>Adding Birthday party areas </li></ul><ul><li>Enter new ‘A’ cities- Ludhiana, Ahmedabad, Baroda- lower spending power , population density </li></ul><ul><li>ISBT terminal Delhi </li></ul><ul><li>Airport & Railway station- Mumbai & Jaipur </li></ul><ul><li>Highways & Petrol Pumps </li></ul><ul><li>Malls & Multiplexes- Lower outlet investment than traditional </li></ul>
  68. 68. Points to Ponder <ul><li>Would customer profile on highways & railway stations be appropriate </li></ul><ul><li>Would they generate enough traffic </li></ul><ul><li>Dispersed outlets- effective catering? </li></ul><ul><li>Expanding too fast? Break even ? </li></ul><ul><li>Successful in developing supply chain & creating a satisfied customer base, opportune time to expand </li></ul>
  69. 69. CEO Speak <ul><li>“ Meticulous planning went in before opening a restaurant. It took us 6 years to open our first outlet because we carried out a detailed survey, then identified the local sources, closely studied the Indian food habits and tastes, before taking the plunge.” </li></ul><ul><li>“ We have been very careful with regard to our expansion plans. McDONALD’s currently operates 50 fast food restaurants in India. We are satisfied with the progress in India so far and want to take the total number of restaurants to 100 by 2006” </li></ul><ul><li>“ McDonald’s fits in neatly with the multiplex culture as our restaurants provide a bright and cheerful ambience and a pleasurable dining experience for the family. </li></ul><ul><li>McDonald’s has so far invested Rs 500 crore in its operations in India. This figure would be raised to Rs 800 crore by 2005. </li></ul>
  70. 70. The Compliment <ul><li>“ McDonald’s products sold in India have been Indianised & produced in accordance with Indian tastes & preferences. Hugely popular products like aloo-tikki burger are now being exported to the Middle East where too they have proven to be a big hit. These evolved products are being studied closely in western countries” </li></ul><ul><li>“ On any given day, McDonald’s restaurant at Doraha near Ludhiana on NH 1, serves up to 2000 customers which is as good as a restaurant in Connaught Place” </li></ul><ul><li>“ We want the right location, right size for a 150 seat restaurant & the right deal which does not involve subletting of the premises. In Chandigarh, we find most commercial properties rented out or embroiled in disputes. We don’t want to get involved in any such deal” </li></ul>
  71. 71. MIPL- points to ponder <ul><li>Investment / outlet excluding real estate- Rs 3 Cr </li></ul><ul><li>Jun 2003, 50 outlets, Planned- 80 outlets by end 2003 </li></ul><ul><li>30 additional outlets = investment > 100 Cr </li></ul><ul><li>Area, Location, Size, Seating- Crucial but expensive </li></ul><ul><li>Scale back expansions by 20% to 64 outlets in India, close 250 outlets in emerging markets </li></ul><ul><li>Can lead to delayed Break-even as huge investments in supply chain, branding, infrastructure </li></ul><ul><li>Figures NA </li></ul><ul><li>Recent lackluster financial performance of parent </li></ul><ul><li>Critical juncture in evolution </li></ul>
  72. 72. Urban Indian Fast Food Market-03 (Estimated 1500 Cr)
  73. 73. MCIL Today <ul><li>“ We’ve established ourselves firmly in the mind of the consumer. Now is the time to expand and extend the brand in whatever manner we can” Vikram Bakshi </li></ul>
  74. 74. <ul><li>Reaching Out </li></ul><ul><li>Gunning for volumes through home delivery </li></ul><ul><li>Extend reach at home, malls, food courts, multiplexes, highways , area with heavy footfalls (metro, stations, bus stands) </li></ul><ul><li>Kiosks stocked with beverages, desserts </li></ul><ul><li>Limited menu restaurants offering most popular fare </li></ul><ul><li>Consumer reach minus expenditure of a full restaurant </li></ul>
  75. 75. Home Delivery <ul><li>Home delivery in Mumbai & Delhi outlets to areas within 15 minutes </li></ul><ul><li>Extreme action for a company that prides itself on trashing anything that remains in the ‘ bin’ for longer than 8 minutes . </li></ul><ul><li>Slowly waking up to the fact that every player in the eating out sector in India door delivers . </li></ul><ul><li>McDonald’s only delivers in Indonesia & Egypt . </li></ul><ul><li>Traffic, parking issues deter consumers due to heavy traffic where McDonald’s are located as a matter of strategy. </li></ul>
  76. 76. Increasing Operational Excellence <ul><li>Footfalls up 25% per outlet per day </li></ul><ul><li>“ We’ve reached a stage where operational excellence is going to drive the growth from now on. So the focus is back on training , which had taken a back seat due to the needs of rapid expansion in the last few years. We’ve increased the number of managers who are going back to training, and are sending more senior managers abroad to gain international exposure ,” Bakshi. </li></ul>
  77. 77. Strategic Analysis <ul><li>SWOT </li></ul><ul><li>Trend Analysis </li></ul>Performance Key Uncertainties Key Certainties

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