McDonalds In India

M. Noman Bari
Strategies Covered in Case
Corporate Strategy
Challenges
Attractiveness
Country Business Strategy
SCM
CSR
Marketing Strategy
Branding,
Pricing,
Promotion,
Distribution

Strategy to Enter in Indian
Wholly owned subsidiary- MIPL
Incorporated in 1993
McDonald's opened its doors in India in Vasant
Vihar, New Delhi in October 1996
Entered into two 50:50 JVs with Connaught Plaza
Restaurants-Vikram Bakshi- North & Hardcastle
Restaurants-Amit Jatia- West
Local Indian employees in all kind of positions and
trained extensively, along with their Indian
management team.
Indian Market
Size of Eating Out market- substantial
Indias food expenditure- $77 Bn / world $ 4000 Bn
(2%)
Highly fragmented food market
Millions of roadside stalls / carts- major market
share
Udipi, Sandwich, PavBhaji, Chaats, Chinese,
Namkeens, Pizza
Organised chains- Narulas, Wimpys, Udipis
Corporate Strategies
Challenges
Economic Liberalization
Entry & Exits in sectors is controlled by Govt
MNC restrictions
Deregulation since 1991 but socialist / swadeshi
mindset continues (Preference for national
products)
MPs comment on MNC in consumer sector
We want computer chips, not potato chips
Pressure Groups
Anti- Western / MNC factions
Health activists
Environmentalists
Animal welfare activists
Sons of the soil campaigners

Challenges
Existing Food Chains
KFC
Pizza Hut
Menu Development
Religious sensibilities of Indian Consumers
Beef not consumed by Hindus
Pork not consumed by Muslim
75% localized menu & 25% international menu
Mutton based Maharaja Mac
McAloo Tikkt Burger, Pizza McPuff, McVeggie etc
Low entry level prices
Attractiveness
Huge Sub-continent
4 times the population of the US
Middle Class estimated at 300 Million
Per Capita GDP $ 400- but at PPP- $2540
4th largest economy- ahead of France, Russia,UK,
Asias 3rd largest-Behind China & Japan (PPP)
Eating out sector growing, consumer spend
increasing
Rs 40000 Cr eating out market growing @ 6%
Rs 1500 Cr urban fast food segment growing @ 20%
Country Business Strategy
Only < 10% population- possible target market
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
Phase I-
Focus on cities of relatively high incomes where
citizens are exposed to western food & culture
Phase II-
Move to smaller satellite towns (Gurgaon, Pune)-
Positive spillover effect of reputation
Jaipur & Agra- To attract foreign tourists
Phase III-
Malls, Multiplexes, Highways, Stations & Airports
No plans for South, East, Goa?
Supply Chain Management (SCM)
Critical for success
Local network for supply chain & distribution
Local suppliers, distributors to match international
quality
Operations & training to match international quality
and hygiene standards
By 2000- Investment in supply chain Rs 300 Crore

Local Sourcing:
Focus on cities of relatively high incomes where
citizens are exposed to western food & culture
Buns from North
Chicken & Cheese from West
Fish, Lettuce & Pickles from South
98% paper, locally sourced
French fries imported from Indonesia
40 suppliers in the chain
Corporate Social Responsibility CSR
Childrens painting competition across cities
Maintaining gardens, parks, heritage structures
Effluent treatments, Pulse Polio, recyclable paper
bags
Litter Patrols to ensure a cleaner neighbourhood.
Huge donations to Latur/ Bhuj / Gujarat
earthquakes
Co-Sponsor of Inter-School Science Quiz
Competition.
2002, tie up with Nalanda Foundation - education
of the underprivileged Girl-Child.
Marketing Strategies
Leadership Marketing
Reconnect with customers thro contemporary
global marketing direction i'm lovin' it
i'm lovin' it reflects an attitude we want our
employees to embrace & reflect in their service
Maximize ad spend impact
Broaden reach through PR
Deliver global brand message through ads,
packaging and restaurant experiences
Emphasis on building sales at existing restaurants
rather than adding new ones.
Marketing Strategy
Promotional strategy to convey world class xp,
Indian adaptations, freshness, nutrition & value
Shift from worldwide positioning of drive-in
convenience and speedy service
Segment- The Young family (<30 years)
Target- The young family who eats out
Focus- Attracting children, so family follows
Positioning- McDonalds mein hai kuch baat
a place for the entire family to enjoy
Differentiation- highlighting brand, food & variety
Happy meal film on Cartoon Network, Zee Tv
Special promotions during festivals
Cost Control / Pricing Strategy
Customers attracted purely by these unsustainable
but attractive low prices would not pay repeat
visits
Development of a low cost supply chain crucial
enabling factor
Brand Food Price
KFC
Burger/KFC, Drink Rs 59 79
Chicken, rice, gravy meal Rs 39
Pizza Hut
2 medium pizzas, Pepsi Rs 350
Wimpys- Mega meals starting Rs 39
McDonald
Value meals Rs 39
Quick bites Rs 25
Soft serve ice creams Rs 8
Promotion Strategy
Collaboration with Coke, MTV, Hungama.com, Sony
Music & GM
Scratch cards on Large combo meals
Prizes- caps, tshirts, CDs, internet cards, free tickets
to a Lucky Ali contest
Purchase of a 2nd meal in a month qualifies for-
Opel Corsa / NZ trip
Snags- Neither Lucky Ali contest materialised nor
Corsa nor NZ trip- issues of credibility
Distribution Strategy
2 centralised distribution centers at Mumbai &
Kochi, each capable of catering to 25 outlets
Aim to enhance quality of storage operations
Emphasis on economies of scale-storage volumes
high
QIP (Quality Inspection Program)- Quality checks at
20 points in the supply chain movement
HACCP (Hazard Analysis Critical Control Point) Food
safety standards emphasizing prevention of faults
than detection thro inspection
AFL logistics- 50:50 JV between AirFreight & FX
Coughlin of USA- McDonalds international logistics
partner
Growth Strategies
Growth Strategy
Increasing seating capacity
Adding Birthday party areas
Restaurant type setup & provide lounge for senior
citizen
Other innovation to attract customers of al ages
Enter new A cities- Ludhiana, Ahmedabad, Baroda-
lower spending power , population density
ISBT terminal Delhi
Airport & Railway station- Mumbai & Jaipur
Highways & Petrol Pumps
Malls & Multiplexes- Lower outlet investment than
traditional
Positive & Negative of Strategy
Breakeven reduce 5 to 6 years while new countries
12 to 13 years
Increase revenues
Local raw material sourcing reduce the cost of Mc
Products
50% annual growth
CSR increase awareness / branding
70/30 while taping 30% of rich market
Poor class want to have Mc Products but due to
high prices its not affordable to lower income class
Not creating barrier to new entrants