`

Project on
Pricing Strategy of McDonalds
In partial fulfilment of requirement for the
Award of Degree of M.Com
Subject:
Marketing Strategies& Plans
Submitted By:
Miss. SEEMA TALREJA
Roll No. 36
M.Com. Part I, Semester II
Under the Guidance of:
Prof. Mr. Prakash Mulchandani

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE

ULHASNAGAR 421003

UNIVERSITY OF MUMBAI
2015 2016

Department of Commerce

Certificate
Thisistocertifythat, Ms.SEEMA.M.TALREJAofM.Com.I,Sem.I (Roll
No.36), hassuccessfullycompletedtheprojecttitled PricingStrategyOf
McDonalds under my guidance for the Academic Year 201516. The
informationsubmittedistrueandoriginalaspermyknowledge.
Prof.PrakashN.Mulchandani
(ProjectGuide)

Prof.GopiShamnani Dr.PadmaV.Deshmukh
(Coordinator,M.ComCourse)

(I/CPrincipal)

ExternalExaminer
2

DECLARATION

I,

Ms. SEEMA.M.TALREJA student

of

SMT.

CHANDIBAI

HIMATMAL MANSUKHANI COLLEGE, ULHASNAGAR studying in

M.Com Part I, (Semester I); I hereby declare that I have
completed

this

project

on

PRICING STRATEGY OF

MCDONALDS forthesubject MarketingStrategies&Plans in the

academic year2015-16.The information submitted is true and
original to the best of my knowledge

SEEMA.M TALREJA

ACKNOWLEGEMENT

To list who all have helped me is difficult because they

are so numerous and the depth is so enormous.
I would like to acknowledge the following as being
idealistic channels and fresh dimensions in the
completion of this project
I take this opportunity to thank the University of
Mumbai forgiving me chance to do this project.
I would like thank my Principal, Dr. Padma V.
Deshmukh for providing the necessary facilities
required for completion of this project.
I would also like to express my sincere gratitude towards
my project guide Prof. Mr. Prakash Mulchandani
whose guidance and care made the project successful.
I would like to thank my college library, for having
provided Various reference books and magazines related
to my project.
Last but not the least, I would like to thank almighty God, my
parents, and my friends who helped me gather these data and have
sat with me for hours discussing about the project.

Objectives

To study Pricing strategy adopted by McDonalds in

Ulhasnagar

To study how price effects the business

To study the discounts pattern.

Limitation
The project is only limited to the study of pricing
strategy of only one restaurant.
Pricing strategy of other restaurants are not being
studied.
Comparison is not being done.
Time, length, and depth of the study are limited as per
the requirements of college

Scope

The project begins with a brief mention of what

Price is and its need and importance. It further
goes on to show the Price strategy of McDonalds

Methodology of study

Data for the project is obtained in two ways primary

source and secondary source.

Primary source-

The primary data is extract by preparing

questionnaire and interviewed manager, staff and
customer of McDonalds restaurant Goal maiden,
Ulhasnagar-421003

Secondary sourceSecondary data for the project has been gathered

from various books and internet.

SR.NO

TOPIC

PG.NO

INTRODUCTION OF PRICING

CHARACTERISTIC OF PRICING

10

IMPORTANCE OF PRICING

11

SETTING PRICING POLICY

12

PRICING STRATEGY

14

5 ELEMENT OF PRICING STRATEGY

21

FACTORS EFFECTING PRICING DECISION

29

INTRODUCTION OF MCDONALDS

32

PHILOSOPHY & VISION

37

10

SWOT ANALYSIS

39

11

PRICING STARTEGY ADOPTED BY MC

DONALDS

43

12

CONCLUSION

46

EXECUTIVE SUMMARY
Pricing is the process whereby a business sets the price at which it will sell its products and
services, and may be part of the business's marketing plan.In setting prices, the business will
take into account the price at which it could acquire the goods, the manufacturing cost, the
market place, competition, market condition, brand, and quality of product.
Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental
aspect of financial modelling and is one of the four Ps of the marketing mix. (The other three
aspects are product, promotion, and place.) Price is the only revenue generating element
amongst the four Ps, the rest being cost centres. However, the other Ps of marketing will
contribute to decreasing price elasticity and so enable price increases to drive greater revenue
and profits.
Pricing can be a manual or automatic process of applying prices to purchase and sales orders,
based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific
vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple
orders or lines, and many others. Automated systems require more setup and maintenance but
may prevent pricing errors. The needs of the consumer can be converted into demand only if the
consumer has the willingness and capacity to buy the product. Thus, pricing is the most
important concept in the field of marketing, it is used as a tactical decision in response to
comparing market situation.
Pricing strategy in marketing is the pursuit of identifying the optimum price for a product.
This strategy is combined with the other marketing principles known as the four P's (product,
place, price, and promotion), market demand, product characteristics, competition, and
economic patterns. The pricing strategy tends to be one of the more critical components of the
marketing mix and is focused on generating revenue and ultimately profit for the company. The

success in pricing strategies for businesses is heightened with clarity on market conditions, an
understanding of the consumer's unmet desire, and the amount they are willing to pay to fulfil it.

PRICING-INTRODUCTION
10

A business can use a variety of pricing strategies when selling a product or service. The price
can be set to maximize profitability for each unit sold or from the market overall. It can be used
to defend an existing market from new entrants, to increase market share within a market or to
enter a new market. Businesses may benefit from lowering or raising prices, depending on the
needs and behaviours of customers and clients in the particular market. Finding the right pricing
strategy is an important element in running a successful business.
Narrowly, price is the amount of money charged for a product or service.
Broadly, price is the sum of all the values that consumers exchange for the benefits of
having or using the product or service.
Dynamic Pricing: charging different prices depending on individual customers and
situations.
Price is the one element of the marketing mix that produce revenue ; the
other element produce cost, prices are the easiest marketing mix element
to adjust ; product features, channels and even promotion take more time
.price also communicating to the market the companys intended value
positioning of its product or brand
Today companies are wrestling with a number of difficult pricing tasks

How to respect to aggressive price cutters

How to price the same product when it goes through different

channels

How to price the same product in different countries

How to price on improved product while still selling the previous

version

Many companies do not handle pricing well. They make these common
mistakes; price is to cost-oriented ; price is not revised often enough to
capitalize on market changes; price is set independent of the rest of the
marketing mix rather than as an intrinsic element of marketing positioning
strategy; and price is not varied enough for different product item ,market
segmentation , distribution channels, and purchase occasions.

11

Companies do their pricing in a variety of ways. In small companies, price is

often set by the boss. In larger companies, pricing is handling by division
and product line managers. Even here,
top management sets general objectives and policies and often approve the
prices proposed by lower level of management.

Characteristics of strategic pricing

Proactive Strategic pricing follows an approach to a business situation that

involves anticipating market and competition changes in advance of their actual
occurrence and making appropriate organizational shifts in response. Many high
technology business operators need to take a more proactive strategy to deal with the
rapidly changing marketplace for their company's products.

Value Based - Value-based pricing is about coming up with a price that your
customers are willing to pay. Value-based pricing (VBP) is the most highly
recommended pricing technique by consultants and academics. The basic concept is
setting a price to capture the majority of what your customers are willing to pay.

Strategic pricing takes into account how much value the customer is going to get out
of that particular product and then keeping that in mind he sets the final price of the
product.

Profit Driven - A profit-oriented pricing strategy involves setting prices for

your products that will guarantee you'll make money on each sale. You determine
your cost for manufacturing each product, then add a percentage for profit. There are
some strategies and issues you should review before setting prices in this manner.
While profits are the goal of any business, setting prices based on profit goals can
present some problems for your business. If competitors price similar products for
less, you may have to weather some lost sales. Though you can price each product to
guarantee a profit, if you find yourself at the high end of the price range, be prepared
to lose customers who are bargain hunters. Having the highest-priced product may
not be entirely negative; many companies such as Apple and Cadillac routinely
12

charge more than competitors but attract a quality-oriented customer. If you can
compete on quality, you may be able to maintain your profit-oriented pricing strateg

13

IMPORTANCE OF PRICING
When marketers talk about what they do as part of their responsibilities for marketing
products, the tasks associated with setting price are often not at the top of the list. Marketers
are much more likely to discuss their activities related to promotion, product development,
market research and other tasks that are viewed as the more interesting and exciting parts of
the job.
Yet pricing decisions can have important consequences for the marketing organization and
the attention given by the marketer to pricing is just as important as the attention given to
more recognizable marketing activities. Some reasons pricing is important include:
Most Flexible Marketing Mix Variable For marketers price is the most adjustable of all
marketing decisions. Unlike product and distribution decisions, which can take months or
years to change, or some forms of promotion which can be time consuming to alter (e.g.,
television advertisement), price can be changed very rapidly. The flexibility of pricing
decisions is particularly important in times when the marketer seeks to quickly stimulate
demand or respond to competitor price actions. For instance, a marketer can agree to a field
salespersons request to lower price for a potential prospect during a phone conversation.
Likewise a marketer in charge of online operations can raise prices on hot selling products
with the click of a few website buttons.
Setting the Right Price Pricing decisions made hastily without sufficient research, analysis,
and strategic evaluation can lead to the marketing organization losing revenue. Prices set
too low may mean the company is missing out on additional profits that could be earned if
the target market is willing to spend more to acquire the product. Additionally, attempts to
raise an initially low priced product to a higher price may be met by customer resistance as
they may feel the marketer is attempting to take advantage of their customers. Prices set too
high can also impact revenue as it prevents interested customers from purchasing the
product. Setting the right price level often takes considerable market knowledge and,
especially with new products, testing of different pricing options.
Trigger of First Impressions - Often times customers perception of a product is formed as
soon as they learn the price, such as when a product is first seen when walking down the
aisle of a store. While the final decision to make a purchase may be based on the value
offered by the entire marketing offering (i.e., entire product), it is possible the customer will
14

not evaluate a marketers product at all based on price alone. It is important for marketers to
know if customers are more likely to dismiss a product when all they know is its price.

Some of the more common pricing objectives are:

Maximize long-run profit

Maximize short-run profit
Increase sales volume (quantity)
Increase dollar sales
Increase market share
Obtain a target rate of return on investment (ROI)
Obtain a target rate of return on sales
Stabilize market or stabilize market price: an objective to stabilize price means that
the marketing manager attempts to keep prices stable in the marketplace and to
compete on nonprime considerations. Stabilization of margin is basically a cost-plus
approach in which the manager attempts to maintain the same margin regardless of

changes in cost.
Company growth
Maintain price leadership
Desensitize customers to price
Discourage new entrants into the industry
Match competitors prices
Encourage the exit of marginal firms from the industry
Survival
Avoid government investigation or intervention
Obtain or maintain the loyalty and enthusiasm of distributors and other sales

personnel
Enhance the image of the firm, brand, or product
Be perceived as fair by customers and potential customers
Create interest and excitement about a product
Discourage competitors from cutting prices
Use price to make the product visible"
Build store traffic
Help prepare for the sale of the business (harvesting)

SETTING PRICING POLICY

15

STEP 1: SELECTING THE PRICING OBJECTIVES:

The company first decides where it wants to position it market offering. The clearer a firms
objectives, the easer is to set price. A company can pursue any of five major objectives
through pricing: survival, maximum current profit, maximum market share, maximum
market skimming, or product quality leadership.
Company purchase survival as their major objective if they are plagued with over capacity,
intense competition, or change in consumer wants. As long as prices cover variable costs
and some fixed costs, a company stays in business. Survival is a short run objective; in the
long run, a firm must learn how to add value or face extinction.
Many companies try to set prices that will maximize current profits. They estimate the
demand and costs associated with alternative prices and choose the price that produces
maximum current profit, cash flow, or Rate of return on investment. This strategy assumes
that the firm has knowledge of its demand and cost functions; in reality, these are difficult to
estimate. In emphasizing current performance, a company may sacrifice long run
performance by ignoring the effects of other marketing mix variables, competitors
reactions, and legal restraints on price.
Some companies want to maximize their market share. They believe that a higher sales
volume will lead to lower cost and higher long run profit they set the lowest price assuming
the market is price sensitive.
It often happens that companies unwilling a new technology favor setting high prices to
skim the market. Sony is a frequent practitioner of market skimming pricing.
When Sony introduced the worlds first high definition television (HD-TV) to the Japanese
market in 1990, the high-tech sales cost $43000.This television were purchased by
16

customers who could afford to pay a high price for the new technology. Sony rapidly
reduced the price over the next three years to attract new buyers, and by 1993a 28-inch H-D
tv cost Japanese buyers just over $6000.In 2001 a customer cold buy a 40-inch H-D TV for
about $2000.A price many could afford. In this way, Sony skimmed the maximum amount
of revenue from the various segments of the markets.

STEP 2: DETERMING DEMAND:

Each price will lead to different level of demand and therefore have a differ impact on a
companys marketing objectives. The relation between alternative prices and the resulting
current demand is captured in demand curve. In the normal case, demand and price are
inversely related; the higher the price, the lower the demand. In this case of prestige goods
the demand curve sometimes slopes upward. Perfume Company raised its price and sold
more perfumes rather than less! Some customer takes the higher price to signify a better
product. However if the price is too high, the level of demand may fall.
On the other hand, the impact of internet has been to increase customers price sensitivity. In
buying a specific book online, for e.g. , a customer can compare the price offered by over 2
dozen online book stores by just taking mysimon.com. These prices can differ by as much as
20 percent. The internet increases the opportunity for price sensitive buyers to find and favor
lower-price sites. At the same time, many buyers are not that price sensitive. McKinsey
conducted a study and found that 89 percent of internet customers visit only 1 book site, 84
percent visited only 1 toy site, and 81 percent visited only 1 music site, which indicates that
there is a less price comparison shopping taking place on the internet that is possible.
Companies need to understand the price sensitivity of their customers and prospects and
their trade-offs peoples are willing to make between price and products characteristics.

STEP 3: ESTIMATING COSTS

17

Demand sets a ceiling of a price on the price the company can charge for its product.
Costs set the floor. The company wants to charge a price that covers its cost of
production, distributing, and selling the product, including a fair return for its efforts and
risks

TYPES OF COSTS AND LEVELS OF PRODUCTION

A companys costs take two firms, fixed and variable. Fixed costs (also known as over
head) are costs that do not vary with production or sales revenue. Accompany must pay bills
each month for rent , heat, and trust, salaries, and so on , regardless of output
Variable costs vary directly with the level of production. For example, each hand calculator
produced by Texas Instruments involves a cost of plastic, macro-processing chips,
packaging, and the like. These costs tend to be constant per unit produced; they are called
variable because their total varies with the number of unit produced.
Total cost consists of the sum of the fixed and variable costs for any given level of
production. Average costs is the cost per unit at that level of production; if is equal to total
cost divided by production. Management wants to charge a price that will at least cover a
total production cost at a given level of production.

ACCUMULATED PRODUCTION
Suppose TI runs a plant that produces three thousand hand calculators per day. As TI gains
experience producing hand calculators, its methods improve. Workers learn shortcuts,
materials flow more smoothly, and procurement costs falls. The result shows, in that average
cost falls with the accumulated production experience.

DIFFERENTIATED MARKETING OFFERS

Todays companies try to adopt their offers and terms to different buyers. Thus a
manufacturer will negotiate different terms with different retail chains. One retailer may
want daily delivery (to keep stock lower) while an other may accept twice a week delivery
in order to get a lower price. The manufacturers costs will differ with each chain, and so
will its profits.

18

TARGET COSTING
Costs change with production sale and experience. They can also change as a result of
concentrated efforts by designers, engineers and purchasing agents to reduce them.

STEP 4: ANALYZING COMPETITORS COSTS, PRICES, &OFFERS:

Within the range of possible prices determined by market demand and companys costs, a
firm must take the competitors costs, prices, and possible price reactions into account. The
firm should first consider the nearest competitors price. If the firm offers contains positive
differentiation features not offered by the nearest competitors, their worth to the customer
should be evaluated and added to the competitors price. If the competitors offers contains
some features not offered by the firm, their worth o the customer should be evaluated and
subtracted from the firms price. Now the firm can decide whether it can charge more, the
same, unless than the competitor. A firm must be aware, however, that competitors can
change their prices in reaction to the price set by the firm.

STEP 5: SELECTING THE PRICING METHOD:

Given the three cs- the customers demand schedule, the cost function, the competitors
prices- a company is now ready to select a price.
Companies select a pricing method that includes one or more of various considerations. We
will examine seven price setting methods: mark-up pricing, target return pricing, perceive
value pricing, value pricing, going rate pricing, action type pricing and group pricing.

MARK-UP PRICING:
The most elementary pricing method is to add a standard mark-up to the products cost.
Construction companies submit job bids by estimating the total project cost and adding a
standard mark-up for profit.
Suppose a toaster manufacture has a following cost and sale expectation
Variable cost per unit ..
Fixed cost
Expected unit sales

.
.

$1
300,000
50,000
19

The manufacturers unit cost is given by

Unit cost= variable cost +

fixed cost =$10+ $300,000 =$16

Unit sales

50,000

Now assume the manufacturer wants to earn a 20 % mark-up on sales. The manufacturers
mark-up price is given by:
Mark-up price =

unit cost
(1-desired return on sales)

= $16

=$20

1-0.

TARGET-RETURN PRICING:
In target return pricing the firm determines the price that would yield its target rate of return
on investment (ROI). Target pricing is used to general motors, which price its auto-mobiles
to achieve a 15-20 percent ROI.

PERCIVED-VALUE PRICING:
In increasing number of companies based their price on the customers perceived value.
They must deliver the value promised by their value proposition, and the customer must
perceive this value. They use the other marketing mix elements, such as advertising and
sales force, to communicate and enhance perceive value in buyers mind.
VALUE-PRICING:
In recent years, several companies have adopted value pricing, in which they win loyal
customers by charging a fairly low price for a high quality offering. Among the best
practitioners of value pricing are WALL-MART, IKEA, and SOUTH-WEST airlines.

GOING RATE-PRICING:
In going rate pricing,the firm basis its price largely on competitors prices. The firm might
charge the same, more, or less than major competitors. In oligopolistic industries that sell a
commodity such as steel, paper, or fertilizers, firms normally charge the same price.
20

ACTION TYPE PRICING:

Is growing more popular,especially with the growth of the internet. There are over 2000
electronic market places selling everything from pigs to use vehicles to cargo to chemicals.
One major use of actions is to dispose of excess inventories or to use good. Company needs
to be aware of the three major types of actions and their separate pricing procedures
*ENGLISH ACTIONS (ascending bids)
*DUTCH ACTIONS (descending bids)
*SEALED BIDS ACTIONS

GROUP PRICING:
The internet is facilitating methods where by consumers are business buyers can join groups
to buy at a lower price. Consumer can go to volumebuy.com to buy electronics, computers,
subscriptions, and another item.

STEP 6: SELECTING THE FINAL PRICE:

Pricing method narrow the range from which the company must select its final price. In
selecting that price, the company must consider additional factors including physiological
pricing, gain and risk sharing pricing, the influence of other marketing mix-elements on
price, company pricing policy and the impact of price on other parties.
PHYSIOLOGICAL PRICING:
Many customers use price as an indicator of quality. Image pricing is especially effective
with ego-sensitive products such as perfumes and expensive cars.

GAIN-RISK-SHARING PRICING:
Buyer may resist accepting a sellers proposals because of the high perceive level of a risk.
The seller has the option of offering to absorb part or all of the risk if he does not deliver the
full promised value.
21

PRICING STRATEGY

22

NEW PRODUCT
Pricing strategies usually change as the product passes through its life cycle. The
introductory stage is especially challenging. Companies bringing out new product face the
challenge of setting prices for the first time

1 ) Market-skimming pricing
The practice of price skimming involves charging a relatively high price for a short time
where a new, innovative, or much-improved product is launched onto a market.
The objective with skimming is to skim off customers who are willing to pay more to
have the product sooner; prices are lowered later when demand from the early adopters
falls.
The success of a price-skimming strategy is largely dependent on the inelasticity of demand
for the product either by the market as a whole, or by certain market segments.
High prices can be enjoyed in the short term where demand is relatively inelastic. In the
short term the supplier benefits from monopoly profits, but as profitability increases,
competing suppliers are likely to be attracted to the market (depending on the barriers to
entry in the market) and the price will fall as competition increases.
The main objective of employing a price-skimming strategy is, therefore, to benefit from
high short-term profits (due to the newness of the product) and from effective market
segmentation.

23

There are several advantages of price skimming

Where a highly innovative product is launched, research and development costs are likely
to be high, as are the costs of introducing the product to the market via promotion,
advertising etc. In such cases, the practice of price-skimming allows for some return on the
set-up costs
By charging high prices initially, a company can build a high-quality image for its product.
Charging initial high prices allows the firm the luxury of reducing them when the threat of
competition arrives. By contrast, a lower initial price would be difficult to increase without
risking the loss of sales volume
Skimming can be an effective strategy in segmenting the market. A firm can divide the
market into a number of segments and reduce the price at different stages in each, thus
acquiring maximum profit from each segment
Where a product is distributed via dealers, the practice of price-skimming is very popular,
since high prices for the supplier are translated into high mark-ups for the dealer
For conspicuous or prestige goods, the practice of price skimming can be particularly
successful, since the buyer tends to be more prestige conscious than price conscious
Similarly, where the quality differences between competing brands is perceived to be large,
or for offerings where such differences are not easily judged, the skimming strategy can
work well. An example of the latter would be for the manufacturers of designer-label
clothing.
Disadvantages of Price Skimming
1. This strategy can backfire if there are close competitors and they also introduce same
products at lower price than consumers will think that company always sells the
products at higher prices which will result in consumers abandoning other products
of the company also.
2. Price skimming is not viable option when there are strict legal and government
regulations regarding consumer rights.

24

3. If the company has history of price skimming than consumers will never buy a
product when it is newly launched, they would rather wait few months and buy the
product at lower price.

2) Market-Penetration pricing
Penetration pricing involves the setting of lower, rather than higher prices in order to
achieve a large, if not dominant market share.
This strategy is most often used businesses wishing to enter a new market or build on a
relatively small market share.
This will only be possible where demand for the product is believed to be highly elastic, i.e.
demand is price-sensitive and either new buyer will be attracted, or existing buyers will buy
more of the product as a result of a low price.
A successful penetration pricing strategy may lead to large sales volumes/market shares and
therefore lower costs per unit. The effects of economies of both scale and experience lead to
lower production costs, which justify the use of penetration pricing strategies to gain market
share. Penetration strategies are often used by businesses that need to use up spare resources
(e.g. factory capacity).
A penetration pricing strategy may also promote complimentary and captive products. The
main product may be priced with a low mark-up to attract sales (it may even be a lossleader). Customers are then sold accessories (which often only fit the manufacturers main
product) which are sold at higher mark-ups.
Before implementing a penetration pricing strategy, a supplier must be certain that it has the
production and distribution capabilities to meet the anticipated increase in demand.
The most obvious potential disadvantage of implementing a penetration pricing strategy is
the likelihood of competing suppliers following suit by reducing their prices also, thus
nullifying any advantage of the reduced price (if prices are sufficiently differentiated the
impact of this disadvantage may be diminished).

25

A second potential disadvantage is the impact of the reduced price on the image of the
offering, particularly where buyers associate price with quality.

Advantages of Penetration Pricing

1. Adoption and Diffusion
Diffusion is the process of acceptance of a new product or service by the consumers.
Adoption is similar to diffusion here the focus is on the psychological acceptance of
the product by the consumer. Rate of diffusion or adoption is the speed at which it is
accepted. Both adoption and diffusion rates are high when penetration policy is
adopted.

2. Not much competition in the initial phase

When penetration pricing is introduced the competitors are caught unaware. Most
importantly it leaves them with very little reaction time. So in the initial phase not
much competition is faced.
3. Good will among early customers
Happy at having struck a profitable deal the customers are ready to come back to the
manufacturer in future. This goodwill created also leads to further promotion of the
product through "word of mouth".
4. Cost efficiency
The emphasis on keeping the price low helps in controlling the cost thereby cost
efficiency is achieved.
5. Competitors are kept at bay
If a manufacturer adopts penetration pricing and lowers the price of his products or
services he may stop competitors from entering the market. This happens because
now the competitors will have to enter the market at lower than existing prices. This
reduces their profit not to mention the risk they face as new entrants in acquiring
market share.
6. Channel benefit
26

As this technique creates a quick turnover it keeps its retailers and distributers happy.

Disadvantages of Penetration pricing

1. The customer expects the prices to remain low for a long term. They are not ready
for the subsequent rise in the price and when it happens they might switch to a
competitor's product. Thus subsequent price hike leads to loss of market share
gained.

2. It is believed that penetration pricing cannot create strong customer relationship and
only attracts customers on the lookout for a profitable deal.

3. There are two ways by which the subsequent price rise can take place. Either a
onetime price hike or over the years a steady increase in price. None of these
methods are foolproof. To overcome this situation the manufacturer can keep the
short-term and long-term price the same and introduce introductory discounts
instead. In this way the customer is aware of the price of the product and is also
eager to seize the introductory offer.

PRODUCT-MIX PRICING STRATEGIES

The strategy for setting the products price often has to be changed when the product is part
of a product mix. In this case the firm looks for a set of prices that maximizes the profit on
27

the total product mix. Pricing is difficult because the various products have related demand
and cost and face different degrees of competition:
Product Line: Setting price steps between product line items (for example. Honda Civic is
implementing product line pricing strategy for their cars as they are offering different
models of same line for different prices with different features)
Optional Product: Pricing optional or accessory products (for example. If a person buys a
new Nokias 6600 cell phone and if he also tends to pay extra amount of money for the
memory card inside of it than it is optional pricing for that product..or another example
can be a person buying a personal computer and paying extra amount of money for the video
card inside of it)
Captive Product: Pricing products that must be used with the main product (for example.
Colgate offering its toothbrush along with its toothpaste.or Gillette offering set of
additional blades with its razors)
By-Product: Pricing low value by product to get rid of them (for example. Many companies
obtain soap during the refining process of cooking oils and then manufactures beauty soaps
and sells it along with the cooking oils as their by-products. As Unilever is obtains Lux
through Dalda)
Product Bundle: Pricing bundles of products sold together (for example Nescafe is offering
its coffee along with its cup for 100 rupees thus their offer is similar to product bundle
besides that different combo deals of KFC which includes different offerings under one
state is also an example of product bundle pricing)

PRICE ADJUSTMENT STRATEGIES

28

A company usually adjusts their basic prices to account for various customers differences
and changing situations. Here we examine the six price adjustment strategies.
1) Discount & Allowance: reduced prices to reward customer responses such as paying
early or promoting the product. (For example. Different seasonal or occasional offers of
Nike or Chen one offering certain discount on different range of shopping)
2) Discriminatory: adjusting prices to allow for differences in customers, products, and
locations (for example. Price of Pepsi in Pearl Continental Hotel as it is much higher than its
actual value in the hotel just because of the segment and environmental change in this case
the cost is the same but according to the segment pricing is different)
3) Psychological: adjusting prices for psychological effects. Ex: $299 vs. $300 (for
example. English toothpaste reduced its prices from 12 to 10 just to attract their customers
and increase their sales in this way they implemented physiological pricing strategy besides
that different offers in the market pricing like just 99 rupees or 999 rupees in various stores
is also physiological pricing strategy.)
4) Value: adjusting prices to offer the right combination of quality and service at a fair price.
(For example a person shopping in Zainab market might seek value and quality at fair price.
This process helps to deliver value and satisfaction to customers.)
5) Promotional: temporarily reducing prices to increase short-run sales. (For example.
Pepsi reduces its prices during the month of Ramadan and also offers different schemes and
similarly Warid Zem offers nights free offers to their customers)
6) Geographical: adjusting prices to account for geographic location of customer. (For
example. DHL charges different rates according to the destination)

FOB Origin Pricing: Geographical pricing strategy in which goods are placed free on
board a career, the customer pays the freight from the factory to the destination. (For
example. A person buying a compact disc from abroad in which he have to pay the
transport expense for bringing it in access)

Uniform Delivered Pricing: A geographical pricing strategy in which the company

charges the same price plus frightened to all customers, regardless of their location.
( for example . every customer have to pay a similar and specified amount of money to
Nike if they are transacting from abroad)
29

Zone Pricing: A geographical pricing strategy in which the company sets up to or

more zones. All customers within a zone pay the same total price; the more distant
zone, the higher the price.( for example. If Adidas is transacting with its customers
from abroad regions then they will charge freight according to the distance of the
region and as the distance will increase freight charges will also increase.)

Basing Point Pricing: A geographical pricing strategy in which the seller designs
some city as a basing point and charges all customers the freight cost from that city to
the customer. ( for example. Dell computers established their basing point in India and
then delivers their products in the Asian regions charging freight from that region)

7) International: adjusting prices in international markets. (For example. Prices of Levis or

Nike might not be same in dolmen mall and in international storesit will be definitely
differ according to the environmental offerings.)

FIVE ELEMENTS OF PRICING STRATREGY

30

Value Creation - Value creation is the primary aim of any business entity. Creating
31

value for customers helps sell products and services, while creating value for shareholders,
in the form of increases in stock price, insures the future availability of investment capital
to fund operations. From a financial perspective, value is said to be created when a
business earns revenue (or a return on capital) that exceeds expenses (or the cost of capital).
But some analysts insist on a broader definition of "value creation" that can be considered
separate from traditional financial measures. "Traditional methods of assessing
organizational performance are no longer adequate in today's economy," according to
ValueBasedManagement.net. "Stock price is less and less determined by earnings or asset
base. Value creation in today's companies is increasingly represented in the intangible
drivers like innovation, people, ideas, and brand."
Price structure - Details of different prices and discounts offered on different order
sizes. The marketer is responsible for developing a pricing structure which is Proactive,
Consistent and Transparent. Only the will your customer trust your pricing policy and
pricing approach in the market.
Price and Value Communication - Price and Value communication involves
communicating credibly, in monetary terms, the differentiating benefits of your product.
The goal, particularly for a higher-priced product, is to establish for the customer the
value identified during the value creation stage. Without that, you run the risk that the
purchasing department does not know the value of your differentiating benefits to their
company, or that they will not acknowledge the value, even if they do know what it is.
Once you have established the economic value, or at least have opened a discussion about
what it is, you no longer need to justify your price premium relative to the competition.
Instead, you can sell or promote your discount relative to the added value that you deliver.
Or, to describe value communication in the negative, you can show that your lower-priced
competitors are none-the-less overpriced because the savings from buying their products is
insufficient to compensate for the value lost by not buying your product! In order to
implement and execute a successful value-based strategy, it is critical that you address
value managementnot just price managementsystemically. Failure to include an
understanding of value in offer development and customer communication activities will
result in a disconnect between what product teams are building, what marketing is
communicating, and what sales is selling, leading to fewer profitable sales and poorer
financial performance.
32

Pricing Policy - The policy by which a company determines the wholesale and retail
prices for its products or services. The company needs to decide how much to charge to
what type of a customer.Whether the company wants to have a different pricing policy for
loyal customers or they want to have a single and consistent pricing policy for all its
customers. If the company plans to give discounts then on what basis they will calculate
the discount. Is it going to be on the basis of quantity purchased or dynamic pricing i.e
different price on different timings.

Price Setting This is the final and the most important level in the pricig pyramid or
the most important element of pricing strategy. At this level, the company actually
determines the price of the product or service it is offering.
The process of coming up with a cost to consumers of a good or service produced by a
business. Marketing managers often influence the price setting process for goods and
services that they help promote, although the price level of a product is typically set based
on its production and distribution costs, as well as the value of the product perceived by
targeted consumers

33

Pricing decisions for a product are affected by internal and external factors.
A. Internal Factors:

1. Cost:
While fixing the prices of a product, the firm should consider the cost involved in producing the
product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the
firm must be able to recover both the variable and fixed costs.

2. The predetermined objectives:

While fixing the prices of the product, the marketer should consider the objectives of the firm.
For instance, if the objective of a firm is to increase return on investment, then it may charge a
higher price, and if the objective is to capture a large market share, then it may charge a lower
price.

3. Image of the firm:

The price of the product may also be determined on the basis of the image of the firm in the
market. For instance, HUL and Procter & Gamble can demand a higher price for their brands, as
they enjoy goodwill in the market.

4. Product life cycle:

The stage at which the product is in its product life cycle also affects its price. For instance,
during the introductory stage the firm may charge lower price to attract the customers, and
during the growth stage, a firm may increase the price.

5. Credit period offered:

The pricing of the product is also affected by the credit period offered by the company. Longer
the credit period, higher may be the price, and shorter the credit period, lower may be the price
of the product.

34

6. Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the firm incurs
heavy advertising and sales promotion costs, then the pricing of the product shall be kept high
in order to recover the cost.

B. External Factors:
1. Competition:
While fixing the price of the product, the firm needs to study the degree of competition in the
market. If there is high competition, the prices may be kept low to effectively face the
competition, and if competition is low, the prices may be kept high.

2. Consumers:
The marketer should consider various consumer factors while fixing the prices. The consumer
factors that must be considered includes the price sensitivity of the buyer, purchasing power,
and so on.

3. Government control:
Government rules and regulation must be considered while fixing the prices. In certain
products, government may announce administered prices, and therefore the marketer has to
consider such regulation while fixing the prices.

4. Economic conditions:
The marketer may also have to consider the economic condition prevailing in the market while
fixing the prices. At the time of recession, the consumer may have less money to spend, so the
marketer may reduce the prices in order to influence the buying decision of the consumers.

5. Channel intermediaries:
The marketer must consider a number of channel intermediaries and their expectations. The
longer the chain of intermediaries, the higher would be the prices of the goods.

Factors affecting pricing decision

35

Having a pricing objective isnt enough. A firm also has to look at a myriad of other factors
before setting its prices. Those factors include the offerings costs, the demand, the customers
whose needs it is designed to meet, the external environmentsuch as the competition, the
economy, and government regulationsand other aspects of the marketing mix, such as the
nature of the offering, the current stage of its product life cycle, and its promotion and
distribution. If a company plans to sell its products or services in international markets, research
on the factors for each market must be analyzed before setting prices. Organizations must
understand buyers, competitors, the economic conditions, and political regulations in other
markets before they can compete successfully. Next we look at each of the factors and what
they entail.

Customers
How will buyers respond? Three important factors are whether the buyers perceive the product
offers value, how many buyers there are, and how sensitive they are to changes in price. In
addition to gathering data on the size of markets, companies must try to determine how price
sensitive customers are. Will customers buy the product, given its price? Or will they believe
the value is not equal to the cost and choose an alternative or decide they can do without the
product or service? Equally important is how much buyers are willing to pay for the offering.
Figuring out how consumers will respond to prices involves judgment as well as research.
Price elasticity, or peoples sensitivity to price changes, affects the demand for products. Think
about a pair of sweatpants with an elastic waist. You can stretch an elastic waistband like the
one in sweatpants, but its much more difficult to stretch the waistband of a pair of dress slacks.
Elasticity refers to the amount of stretch or change. For example, the waistband of sweatpants
may stretch if you pull on it. Similarly, the demand for a product may change if the price
changes. Imagine the price of a twelve-pack of sodas changing to $1.50 a pack. People are
likely to buy a lot more soda at $1.50 per twelve-pack than they are at $4.50 per twelve-pack.
Conversely, the waistband on a pair of dress slacks remains the same (doesnt change) whether
you pull on it or not. Likewise, demand for some products wont change even if the price
changes. The formula for calculating the price elasticity of demand is as follows.
Price elasticity = percentage change in quantity demanded percentage change in price
When consumers are very sensitive to the price change of a productthat is, they buy more of
it at low prices and less of it at high pricesthe demand for it is price elastic. Durable goods
such as TVs, stereos, and freezers are more price elastic than necessities. People are more likely
36

to buy them when their prices drop and less likely to buy them when their prices rise. By
contrast, when the demand for a product stays relatively the same and buyers are not sensitive to
changes in its price, the demand is price inelastic. Demand for essential products such as many
basic food and first-aid products is not as affected by price changes as demand for many
nonessential goods.
The number of competing products and substitutes available affects the elasticity of demand.
Whether a person considers a product a necessity or a luxury and the percentage of a persons
budget allocated to different products and services also affect price elasticity. Some products,
such as cigarettes, tend to be relatively price inelastic since most smokers keep purchasing them
regardless of price increases and the fact that other people see cigarettes as unnecessary. Service
providers, such as utility companies in markets in which they have a monopoly (only one
provider), face more inelastic demand since no substitutes are available.

Competitors
How competitors price and sell their products will have a tremendous effect on a firms pricing
decisions. If you wanted to buy a certain pair of shoes, but the price was 30 percent less at one
store than another, what would you do? Because companies want to establish and maintain loyal
customers, they will often match their competitors prices. Some retailers, such as Home Depot,
will give you an extra discount if you find the same product for less somewhere else. Similarly,
if one company offers you free shipping, you might discover other companies will, too. With so
many products sold online, consumers can compare the prices of many merchants before
making a purchase decision.
The availability of substitute products affects a companys pricing decisions as well. If you can
find a similar pair of shoes selling for 50 percent less at a third store, would you buy them? The
merchants must look at substitutes and potential entrants as well as direct competitors.

37

38

Introduction:

When the Dick and Mac McDonald opened their first restaurant in San Bernardino,
California in 1948, they never could have imagined the extraordinary growth their
company would experience. From modest beginnings, they found a winning formula
selling high quality products quickly and low-cost. It was not until 1955 when Ray Kroc, a
salesman from Chicago, became involved in the business that McDonald's really began to
flourish. Kroc realized the same successful McDonald's formula could be exploited
throughout the United States and beyond with the use of franchising. A franchise is an
agreement or license to sell a company's products exclusively in a particular area, or to
operate a business that carries that company's name.
In 1955, Kroc knew that the key to success was through rapid expansion; thus,
the best way to achieve this was through offering franchises. Today, over 70 percent of
McDonald's Restaurants are franchises. In 1986, the first franchised McDonald's opened
in the United Kingdom. Now, there are over 1,150 restaurants, employing more than 49,000
people, of which 34 percent are operated by franchisees. Moreover, there are over
30,000 these restaurants in more than 119 countries, serving over 47 million customers
around the world. In 2000 alone, McDonald's served over 16 billion customers. For
perspective, that number is equivalent to providing a lunch and dinner for every man,
woman, and child in the world! McDonald's global sales were over $40 billion, making
it by far the largest food service company in the world.
Now McDonalds Corporation USA is the ninth most valuable brand in the world. In
October 1996, McDonalds opened its first Indian outlet in Vasant Vihar, an affluent
residential colony in Indias capital, New Delhi. As of November 2004, McDonalds
has opened a total of 58 restaurants, mostly in the northern and western part of India. While
McDonalds opened 34 restaurants in five years (by 2001), 58 restaurants in eight years
(by
2004), it is now planning to add more than 90 new restaurants in the next coming
years.
Although the initial scenes of crowds lining up for days outside the McDonalds
restaurants in Delhi and Mumbai are no longer seen, Indian consumer response to
McDonalds products still remains very strong.
McDonald's India is a joint-venture
company managed by Indians. McDonalds
India, a subsidiary of McDonalds USA, has
expanded its presence in India via 2
joint venture companies Connaught Plaza
restaurants and Hardcastle restaurants.
McDonalds (India) has a 50 per cent equity
stake each in both joint venture companies.
Connaught Plaza restaurants manages
operations
and
expansions
across
North
39

India (Delhi, Jaipur and Punjab) led by Vikram Bakshi and Hardcastle restaurants,
which is headed by Amit Jatia, manages operations and expansions across Western India
(Mumbai)

40

The growth of McDonalds in India is not as rapid as in other countries. How did
McDonalds do it? How did a hamburger chain become so prominent in a cultural zone
dominated by non-beef, non-pork, vegetarian, and regional foods such as chola bhatura,
kababs, bhaji, idli, samosa, dosa, vada, sambar, bhelpuri, and rice? The answer to this
question lies in McDonalds carefully planned entry and expansion strategy in accordance
with Indias changing political, economic, and cultural landscape in the 1990s.
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. Part of
this development involves the transfer of state-of-the-art food processing technology,
which has enabled Indian businesses to grow by improving their ability to compete in
todays international markets. 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 and contributes a portion of its
success to communities in the form of municipal taxes and reinvestment.
The above aspects of McDonalds do not get covered and highlighted by the news
hungry press. But when the false news of using beef allow in the French fries hit the
market, the press did not leave a chance to exaggerate it. Despite the fact that right
form the beginning; no beef ingredients have been used in any of the products in India.
The marketing agency of McDonalds, Mudra comes to its rescue in such times.
The advertisements created by Mudra are a rage all over the nation, especially
amongst the children. Who can forget the little kid who gets nervous in the school
competition, but becomes happy again when his father takes him to McDonalds?
McDonalds India has tried not to leave any stone un-turned in its objective to
satisfy the Indian customer. But in Amit Jatias words, Customers are generally not
forgiving. According to the survey conducted, customers demand low prices, more
seating space, more variety, home delivery, and the list is endless.
The fundamental secret to McDonalds success is the way it achieves uniformity
and allegiance to an operating regimen with proper marketing strategy. McDonalds India
has to adhere to many rules and regulations laid down by the parent company, and it
still has to cater to the Indian customer and his needs. McDonalds India is a case study
on how to mix conformity with creativity.

41

2. PHILOSOPHY & VISION

Every company has a Vision or Mission Statement. A vision statement should
be short, clear, vivid, inspiring and concise without using jargon, complicated
words or concepts. It represents the corporation guiding principles. It subtly indicates
the businesses the firm will pursue and the customer needs it will seek to satisfy. The
vision statement also allows the employees to clearly adhere to the standards set up by
the business unit and work in as per the guidelines framed by the company.

2.1 McDonalds Vision Statement

"McDonald's vision is to be the world's best quick service restaurant experience.

Being the best means providing outstanding quality, service, cleanliness, and value,
so that we make every customer in every restaurant smile."

The McDonald's philosophy of Quality, Service, Cleanliness and Value (QSC&V)

is the guiding force behind its service to the customers. McDonalds India serves
only the highest quality products. All McDonalds suppliers adhere to Indian Government
regulations on food, health and hygiene while continuously maintaining their own
recognized standards. All McDonalds products are prepared using the most current stateof-the-art cooking equipment to ensure quality and safety. At McDonalds, the customer
always comes first. McDonalds India provides fast friendly service- the hallmark of
McDonalds that sets its restaurants apart from others. McDonalds restaurants provide a
clean, comfortable environment especially suited for families. This is achieved through
McDonalds stringent cleaning standards, carefully adhered to.

McDonalds menu is priced at a value that the largest segment of the

Indian consumers can afford. McDonalds does not sacrifice quality for value rather
McDonalds leverages economies to minimize costs while maximizing

value to

customers. The main effort of McDonaldss service is to make customer the whole sole
beneficiary through its stringent standards maintained all over the world.

42

3. SWOT ANALYSIS

3.1 SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. To meet the
needs of the key market it is important to analyse the internal marketing strengths
of the organisation. Strengths and weaknesses must be identified, so that a marketing
strategy which is right for the business can be decided upon. Once the strengths and
weaknesses are determined, they are combined with the opportunities and threats in the
market place. This is known as SWOT analysis. SWOT analysis is a tool for auditing an
organization and its environment. It is the first stage of planning and helps businesses
to focus on key issues. Once key issues have been identified, they feed into marketing
objectives.

Strengths

McDonalds has built up huge brand equity. It is the No. 1 fast-food company by
sales, with more than 31,000 restaurants serving burgers and fries in almost 120
countries. Sales, 2007 (11, 4009 million), 5.6% sales growth.

Good innovation and product development. It continually innovates to

retain
customers in the business.

The McDonalds brand offers consumers choice, reasonable value and great service

Large amounts of investment have gone into suppo rting its franchise network,

75% of
stores are franchises.

Loyal staff and strong management team.

Advertisements and promotion to market the McDonalds as a brand carves a

strong image on customers mind.

43

Weaknesses

Core

product line out of line with the trend towards healthier lifestyles for adults

and children. Product line heavily focused towards hot food and burgers.

Locations of outlets are sometimes not to closer to storage centres resulting in loss

of quality.

Seasonal.

Quality issues across the franchise network.

Break-even sales can be generated after operating for certain number of years only.

Opportunities

Joint ventures with retailers (e.g. supermarkets).

Consolidation of retailers likely, so better locations for franchisees.

Respond to social changes - by innovation within healthier lifestyle foods. Its

move into hot baguettes and healthier snacks (fruit) has supported its new
positioning.

Use of CRM, database marketing to more accurately market to its consumer

target groups. It could identify likely customers (based on modelling and
profiles of
Shoppers) and prevent brand switching.

Strengthen its value proposition and offering, to encourage customers who visit coffee
shops into McDonalds.

Installing childrens play-parks and focus on educating consumers about

health,fitness.

Continued focus on corporate social responsibility, reducing the impact on the

environment and community linkages.

Expansion into emerging markets of cities present in India.

Focus

on middle-class income group customers with low-priced quality goods will

enhance the profit margin.

Senior Citizens have been totally deprived of marketing strategy adopted by

McDonalds. The burgers and eatables are more Indianized so that senior citizens find it
familiar but the introduction of more milky beverages would attract more senior
44

citizens.
Threats
Social

changes - Government, consumer groups encouraging balanced meals, 5 a day

fruit and vegetables.

Focus

by consumers on nutrition and healthier lifestyles.

Competitive pressures on the high street as new entrants offering value and greater

Product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S.

Recession or down turn in economy may affect the retailer sales, as household

Budgets tighten reducing spend and number of visitors.

Pressure groups - environmental.

Since

McDonalds is a symbol of American cultural imperialism, it continues to face

continue opposition from religious fundamentalists, protectionists, animal rights activists,

and anti-globalization protestors.

45

PRICING STRATEGY ADOPTED BY MC DONALDS

Pricing is the only mix which generates a turnover for the organization. The
remaining 3ps are the variable cost for the organization. It costs to produce and design a
product; it costs to distribute a product and costs to promote it. Price must support these
elements of the mix. Pricing is difficult and must reflect supply and demand relationship.

PENETRATION

SKIMMING

COMPETITION
PRICING STRATEGY
PRODUCT LINE

BUNDLE

Psychological

The customer's perception of value is an important determinant of the price

charged. Customers draw their own mental picture of what a product is worth. A product is
more than a physical item; it also has psychological connotations for the customer. The
danger of using low price as a marketing tool is that the customer may feel that quality is
being compromised. It is important when deciding on price to be fully aware of the
brand and its integrity. A further consequence of price reduction is that competitors
match prices resulting in no extra demand. This means the profit margin has been reduced
without increasing sales.

46

Worldwide,

McDonalds

has

achieved

success

by

tapping

middle-class

households. But in India, while McDonalds has been able to get a larger share of rich
and upper-middle class population, it has not been as successful at effectively tapping
the middle-class and lower middle-class segments. Capturing the latter segment is
critical as McDonalds starts entering into smaller cities. But this section has mainly
stayed away because of a widely prevailed perception that McDonalds is expensive. This
is the reason why the company cut prices on its vegetable nuggets from Rs 29 to Rs 19
and the soft service ice cream cone from Rs 15 to Rs 7 in 1997. In September 2001,
McDonalds offered its enormously popular shudhshakahari (pure vegetarian) Veg
Surprise (a veggie burger) for Rs 17. With this price, McDonalds was able to sell
the veggie burger 40% more than what it expected within a month between September
and October of 2001. In March 2004, McDonalds launched a Happy Price menu under
which it sells four of its burger products at Rs20 each. This has led to a 25% increase in
customers. Clearly, the McDonalds strategy has been to increase sales volume of its
products by making its products available at an affordable price.
A very popular punch line of McDonalds - Aap ke zamane mein, baap ke zamane
ka daam. The main reason of this price strategy was too attract the middle class & the
lower class of people in India. After this not only the upper class prefers going there but
all class of people go there. The company strives to differentiate itself from other fast food
restaurants by offering a variety of menu items that appeal to a variety of people from
those who just want great burgers, to those who just want a quick healthy meal.
Value Pricing
Happy meal Small burger, French fries, Coke + Toy
Medium Meal Combo- Burger, French fries, Coke-Veg Rs: 75, Maharaja Mac
MealRs:95
Family Dines under Rs: 300
Prices lower than Pakistan, Sri Lanka, and 50% lower than U.S.
The most important reason for McDonalds pricing flexibility is its well-established
supply chain arrangement, which ensures efficiency and speed in distribution. Besides,
huge increases in volume sales and food processing technology have been helping the
company to offset its cost.
47

CONCLUSION
McDonald's marketing mix is strategic because of the diverse approaches that
are used. First, in identifying the "four P's" of marketing addressed earlier (product, price,
promotion, and placement), research shows that McDonald's is very careful in making
decisions that effect each area and/or how each area effects the other. McDonald's
is concerned about how the firm will fulfil the needs and wants of its customers and in the
activities associated with maintaining the relat ionships with its stakeholders. McDonald's
stakeholders include customers, franchisees, suppliers, employees, and the local
communities surrounding them.
McDonald's has shown care for customers through the decisions to add more
healthful foods to the menus, by changing how products are packaged or how foods are
prepared, and by philanthropic contributions and sponsorships. Local adaptation, no
doubt, has contributed to McDonalds business growth in India.

The restaurant

has developed competitive advantages in the industry of serving quality fast food at a
low cost. In addition to these decisions, the development of the Golden Arches or Ronald
McDonald has provided consumers with memorable icons that are associated with
quality, service, and value, just like the McDonald brothers and Ray Kroc intended.
McDonald's faces some difficult challenges in moving away from the fast food
king to a more health conscious provider for customers who care about what they eat. The
keys to its future success will be maintaining its core strengths-an unwavering focus on
quality and consistency-while carefully experimenting with new options. The company's
environmental efforts, while important, should not overshadow its marketing initiatives.
Though there are many opportunities for this fast food giant, McDonald's must keep the
strategic nature of its marketing efforts to stay on top and provide what customers want.

48

49