Description
helpful project for tybms students............of 200mrks....................
K.J.SOMAIYA.COLLEGE OF ARTS & COMMERCE, VIDYAVIHAR (EAST)
PROJECT REPORT ON
‘MCDONALD’S-BUSINESS STRATEGY’
SUBMITTED BY PRANJAL PANDHARINATH KUBAL
T.Y.B.M.S. [Semester V-VI] ROLL NO-75
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2011-12
DECLARATION
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I PRANJAL PANDHARINATH KUBAL student of K.J.SOMAIYA COLLEGE of TYBMS (Semester 5-6) hereby declare that I have completed this project on ‘MCDONALD’S–BUSINESS SRTATEGY’ in the Academic Year 2011-12. The Information submitted is true and original to the best of my knowledge.
Signature of Student
CERTIFICATE
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I PRANJAL PANDHARINATH KUBAL student of K.J.SOMAIYA COLLEGE of TYBMS (Semester 5-6) herby certify that I have completed this project on ‘MCDONALD’S-BUSINESS STRATEGY’ in the Academic Year 2011-12. The Information submitted is true and original to the best of my knowledge.
Signature of the Principal of The College/Institution
Signature of BMS Co-ordinator
Signature of Internal Examiner
Signature of External Examiner
ACKNWOLEDGEMENT
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This ‘McDonalds-Business strategy’ is the outcome of sincere and positive contribution. The satisfaction that accompanies that the successful completion of any task would be incomplete without the mention of people whose ceaseless cooperation made it possible, whose constant guidance and encouragement crown all efforts with success. I wish to express my sincere gratitude to our Principal Mrs. Suda Vyas and our BMS Co-ordinator Mr. Sandip Gupta for providing an opportunity to do this project work. I am highly indebted to my project guider Mr. Deelip Palsupare for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project without his support I would have not be able to make it properly Finally, yet importantly, I would like to express my thanks to my beloved parents for their blessings, friends for their help and wishes for the successful completion of this project.
INDEX
SR NO PARTICULARS PAGE NO
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Introduction History of McDonald’s Corporate overview Globalization McDonalds in India SWOT analysis of McDonald’s Strategy of McDonald’s 7 P’s of McDonald’s McDonald’s & Hotel Industry Social Responsibility of McDonald’s Pros & cons of McDonald’s McDonald’s corporation in new millennium Privacy policy regarding children Indian fast food scenario Behind the country SCM at McDonald’s The media magic The marketing strategy of McDonald’s The road ahead McDonald’s Case study Employment opportunities & Benefits Survey of customers Conclusion Bibliography Questionnaire
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INTRODUCTION
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily. Headquartered in the
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United States, the corporation was founded by businessman Ray Kroc in 1955 after he purchased the rights to a small hamburger chain operated by the eponymous Richard and Maurice McDonald. A McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billions. McDonald’s consumer primarily tastes, the sells hamburgers, cheeseburgers, chicken, French has expanded its menu to fries, breakfast items, soft, shakes and desserts. In response to changing company include salads, wraps and fruit. A key element of McDonald's strategy since the beginning has been the policy of the company to own all property on which a McDonald's outlet was built, regardless of whether that location was franchised or company-owned. Rental income varies from property to property, but it has been estimated that McDonald's generates more money from its rent than from its franchise fees. McDonald’s real estate holdings and rent generated from these holdings are an important component of the company's value and income. McDonald's is unique in the fast-food industry in that it owns much of its real estate. In most cases, McDonald's restaurants are located on prime high-traffic real estate that is highly visible and easily accessible McDonald's conditions for a franchise location include a corner lot with at least 35,000 square feet of land whose entrance and exit were facilitated by a traffic light. McDonald's also earns money by marketing excess land. The company was also testing new methods for raising revenue, such as selling retail merchandise in certain stores. In 2002 Jim Cantaloupe came out of retirement to lead McDonald's turnaround back to profitability and restore the image of one the world's best known brands. The new strategy was called the McDonald's Plan to Win and focused on what the company identified as its five key drivers of success: people, products, place, price, and promotion. The first driver of exceptional customer
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experiences would focus on people, the employees who dealt with the customers on a daily basis. In response to a customer service ranking that rated McDonald's dead last in the fast-food industry, even lower than the IRS. McDonald's vowed to do a better job of staffing its restaurants at busy times and rewarding employees for delivering outstanding customer service. An interactive e-learning program to cost-effectively train employees in customer service attitudes and skills would be instituted by reducing the menu and using more.
HISTORY OF MCDONALD’S
The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 furthered the principles of the modern fastfood restaurant that the White Castle hamburger chain had already put into
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practice more than two decades earlier. The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee". Speeded was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having puffed out costume legs. McDonald's first filed for a U.S. trademark on the name McDonald's on May 4, 1961, with the description "Drive-In Restaurant Services," which continues to be renewed through the end of December 2009. In the same year, on September 13, 1961, the company filed a logo trademark on an overlapping, double arched "M" symbol. The overlapping double arched "M" symbol logo was temporarily disfavored by September 6, 1962, when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years. The famous double arched "M" symbol in use today did not appear until November 18, 1968, when the company filed a U.S. trademark. The first McDonald's restaurants opened in the United States, Canada, Costa Rica, Panama, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden, in order of openings. The present corporation dates its founding to the opening of
a franchised restaurant by Ray Kroc, in Des Plaines, Illinois, on April 15, 1955, the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion, and the company became listed on the public stock markets in 1965. Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The site of the McDonald brothers' original restaurant is now a monument. With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American
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way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility
CORPORATE OVERVIEW
Facts and figures
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McDonald's restaurants are found in 119 countries and territories around the world and serve 58 million customers each day. McDonald's operates over 31,000 restaurants worldwide, employing more than 1.5 million people. The company also operates other restaurant brands, such as Piles Café. Focusing on its core brand, McDonald's began divesting itself of other chains it had acquired during the 1990s. The company owned a majority stake in Chipotle Mexican Grill until October 2006, when McDonald's fully divested from Chipotle through a stock exchange. Until December 2003, it also owned Donatos Pizza. On August 27, 2007, McDonald's sold Boston Market to Sun Capital Partners. Types of restaurants
Most standalone McDonald's restaurants offer both counter service and drivethrough service, with indoor and sometimes outdoor seating. Drive-Thru, AutoMac, Pay and Drive, or "McDrive" as it is known in many countries, often has separate stations for placing, paying for, and picking up orders, though the latter two steps are frequently combined; it was first introduced in Arizona in 1975, following the lead of other fast-food chains. The first such restaurant in Britain opened at Fallow field, Manchester in 1986.
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In some countries, "McDrive" locations near highways offer no counter service or seating. In contrast, locations in high-density city neighborhoods often omit drive-through service. There are also a few locations, located mostly in downtown districts that offer Walk-Thru service in place of Drive-Thru. To accommodate the current trend for high quality coffee and the popularity of coffee shops in general, McDonald's introduced McCafé, a cafe-style accompaniment to McDonald's restaurants in the style of Starbucks. McCafé is a concept created by McDonald's Australia, starting with Melbourne in 1993. Today, most McDonald's in Australia have McCafés located within the existing McDonald's restaurant. In Tasmania, there are McCafés in every store, with the rest of the states quickly following suit. After upgrading to the new McCafé look and feel, some Australian stores have noticed up to a 60% increase in sales. As of the end of 2003 there were over 600 McCafés worldwide. Some locations are connected to gas stations/convenience stores, while others called McExpress have limited seating and/or menu or may be located in a shopping mall. Other McDonald's are located in Wal-Mart stores. McStop is a location targeted at truckers and travelers which may have services found at truck stops. Since 1997, the only Kosher McDonald's in the world that is not in Israel is located in the "Abasto de Buenos Aires", Argentina.
Playgrounds
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Some McDonald's in suburban areas and certain cities feature large indoor or outdoor playgrounds. The first Play Place with the familiar crawl-tube design with ball pits and slides was introduced in 1987 in the USA, with many more being constructed soon after. Some Play Place playgrounds have been renovated into "R Gym" areas. Redesign
In 2006, McDonald's introduced its "Forever Young" brand by redesigning all of their restaurants, the first major redesign since the 1970s. The design includes the traditional McDonald's yellow and red colors, but the red is muted to terra cotta, the yellow was turned golden for a more "sunny" look, and olive and sage green were also added. To warm up their look, the restaurants have less plastic and more brick and wood, with modern hanging lights to produce a softer glow. Contemporary art or framed photographs hang on the walls.
Business model
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McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants. Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly. The remainder is operated by others through a variety of franchise agreements and joint ventures. The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonald's may also collect rent, which may also be calculated on the basis of sales. As a condition of many franchise agreements, which vary by contract, age, country, and location, the Corporation may own or lease the properties on which McDonald's franchises are located. In most, if not all cases, the franchisee does not own the location of its restaurants. The UK business model is different, in that fewer than 30% of restaurants are franchised, with the majority under the ownership of the company. McDonald's trains its franchisees and others at Hamburger in Oak Brook, Illinois. In other countries, McDonald's restaurants are operated by joint ventures of McDonald's Corporation and other, local entities or governments. As a matter of policy, McDonald's does not make direct sales of food or materials to franchisees, instead organizing the supply of food and materials to restaurants through approved third party logistics operators. According to Fast Food Nation by Eric Schlosser (2001), nearly one in eight workers in the U.S. have at some time been employed by McDonald's. (According to news piece on Fox News this figure is one in ten.) The book also states that McDonald's is the largest private operator of playgrounds in the U.S., as well as the single largest purchaser of beef, pork, potatoes, and apples. The selection of meats McDonald's uses varies with the culture of the host country.
Shareholder dividends
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McDonald's has increased shareholder dividends for 25 consecutive years, making it one of the S&P 500 Dividend Aristocrats.
GLOBALISATION
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McDonald's has become emblematic of globalization, sometimes referred as the "McDonaldization" of society. The Economist magazine uses the "Big Mac Index": the comparison of a Big Mac's cost in various world currencies can be used to informally judge these currencies' purchasing power parity. The EFTA countries are leading the Big Mac Index with the top 3 most expensive Big Mac's. Iceland has the most expensive Big Mac, followed by Norway and Switzerland. The brand is known informally as "Mickey D's" (in the US and Canada), "Macky D's" (in the UK), "Mäkkäri" (in Finland), "McDo" (in France, Quebec, the Philippines, and the Kansai region of Japan), "Maccer's" (in Ireland), "Macarrannis" (in Mexico), "Maccas" (in New Zealand and Australia), "McD's" (in New Zealand), "Donken" (in Sweden), "de Mac" (in the Netherlands), or "Mac" (in Brazil). Thomas Friedman once said that no country with a McDonald's had gone to war with another. However, the "Golden Arches Theory of Conflict Prevention" is not strictly true. Careful historians point to the 1989 United States invasion of Panama, NATO's bombing of Serbia in 1999, and the 2006 Lebanon War as exceptions. Some observers have suggested that the company should be given credit for increasing the standard of service in markets that it enters. A group of anthropologists in a study entitled Golden Arches East (Stanford University Press, 1998, edited by James L. Watson) looked at the impact McDonald's had on East Asia, and Hong Kong in particular. When it opened in Hong Kong in 1975, McDonald's was the first restaurant to consistently offer clean restrooms, driving customers to demand the same of other restaurants and institutions. In
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East Asia in particular, McDonald's have become a symbol for the desire to embrace Western cultural norms. McDonald's have recently taken to partnering up with Sinopec, China's second largest oil company, in the People's Republic of China, as it begins to take advantage of China's growing use of personal vehicles by opening numerous drive-thru restaurants.
MCDONALD’S IN INDIA
McDonald's opened its doors in India in October 1996. Ever since then, our family restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana,
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Jaipur, Noida Faridabad, Doraha, Manesar and Gurgaon have proceeded to demonstrate, much to the delight of all our customers, what the McDonald's experience is all about. Our first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A. Almost 50 years down the line, we are the world's largest food service system with more than 30,000 restaurants in 100 countries, serving more than 46 million customers every day. Locally Owned McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations. Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald's in April 1995, they trained extensively, along with their Indian management team, in McDonald's restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India. Respect for local culture McDonald's India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. McDonald's does not offer any beef or pork items in India. Only the freshest chicken, fish and vegetable products find their way into our Indian restaurants. In addition, we've re-formulated some of our products using spices favored by Indians. Among these are McVeggie™ burger, McAloo Tikki™ burger, Veg. Pizza McPuff™ and Chicken McGill™ burger. We've also created eggless sandwich sauces for our vegetarian customers. Even our soft serves and McShakes are egg-less, offering a larger variety to our vegetarian consumers. International Standards
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McDonald's India's local suppliers provide us with the highest quality, freshest ingredients. Complete adherence to the Indian Government regulations on food, health and hygiene is ensured, while maintaining our own recognized international standards. Fast, friendly service - the hallmark of McDonald's restaurants the world over is the mantra we abide by Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are sanitized several times each hour. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant. Philosophy "They take the burger business more seriously than anyone else." When McDonald's founder, Ray Kroc made that memorable statement, he was letting the world in on the philosophy and secret behind McDonald's phenomenal success. Their vision to be India’s "best" quick service restaurant experience is supported by a set of principles and core values.
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The principles that guide us…Quality, Service, Cleanliness & Value - It is an unflinching McDonald's ideology that our customers must always get quality products, served quickly and with a smile, in a clean and pleasant environment; and all at a fair price
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They are committed to exceeding our customers' expectations in every restaurant every time. They have a passion and a responsibility for enhancing and protecting the McDonald's brand. They believe in a collaborative management approach, employing a mutually respectful business philosophy They will seize every opportunity to innovate and lead the industry on behalf of our customers.
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It was early evening and one of the 25 McDonald's outlets in India was bustling with activity with hungry souls trooping in all the time. No matter what one
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ordered - a hot Maharaja Mac or an apple pie - the very best was served every time. But did anyone ever wonder as to how this US giant managed the show so perfectly? The answer seemed to lie in a brilliantly articulated food chain, which extended from these outlets right up to farms all across India. US-based fast food giant, McDonald's success in India had been built on four pillars: limited menu, fresh food, fast service and affordable price. Intense competition and demands for a wider menu drive-through and sit-down meals encouraged the fast food giant to customize product variety without hampering the efficacy of its supply chain. Around the world (including India), approximately 85% of McDonald's restaurants were owned and operated by independent franchisees. Yet, McDonald's was able to run the show seamlessly by outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain. Between 1992 and 1996, when McDonald's opened its first outlet in India, it worked frenetically to put the perfect supply chain in place. It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect cold chain1 in place. And explained to the suppliers precisely why only one particular size of peas was acceptable (if they were too large, they would pop out of the patty and get burnt).These efforts paid off in the form of joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's.
SWOT ANALYSIS OF MCDONALD’S
Strengths ? McDonalds has successfully rolled out new items like coffees, smoothies, and Angus burgers, expanding the range of menu choices. ? With a strong product offering, the company has grown income throughout the recession, nothing strong increases in same store sales.
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? Operations are spread around the world, meaning the company is not exposed to just once currency or economy.
? Even trading near its highs, McDonald’s serves up sizzling dividend
yields that top !0 treasury. The yield comes with a side order of annual dividend hikes dating back to 1976.The annual dividend payment has gone from 55cents per share in 2005 to$2.20 this year. Weakness
? It will be harder ant harder to find prime locations to build a set of golden
arches. The U.S is saturated with its restaurant. So growth will have to occur internationally. Posing potential cultural challenges.
? While the annual dividend hikes are likely to continue, the dividend
growth rate has been slowing and will probably continue to slow or level off. Opportunities
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Customer Demand- The needs for the good quality control of fast food and hygienic environment.
? Compliance supply chain -Ensure the quality and cost control with economies of scale from large ordering.
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New launch of food product -Promoting new healthy menu and creating needs to customers. Annual market growth rate-Focus the market segment of young and energetic people and right positioning in high quality products
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Social/ political/ legal impact-Enhancing the advance technology on the cosmetic products with no harm to the environment and natural to skin. Threats
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Competitive intensity -Very strong competition in catering market. Technological requirement- Need innovation and investment in developing high technology in farming to improve the quality of meat provided.
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Overall market size-The overall market size is becoming saturated.
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STRATEGY OF MCDONALD’S
McDonald’s Corporation, the world’s largest and best-known global foodservice retailer, has demonstrated positive momentum with a growth potential of opening 2,000 restaurants per year worldwide. Total stores in 1998 exceeded 23,000, with over 12,000 in the United States and 11,000 in company's strategic priority providing exceptional customer care, remaining an efficient and quality producer, offering high value, and effectively marketing McDonald's brand on a global scale. The future success of McDonald's is based on strategically managing its strengths and competitive advantages today to develop
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increasingly profitable positions in its global markets tomorrow. McDonald's strategy has the following core elements. Growth Strategy ? Add 2000 restaurants annually, some company owned and some franchised, with about two-thirds outside the United States. ? Promote more frequent customers via the addition of breakfast and dinner menu low price specials, and Extra Value Meals. ? Dominate the global food-service industry. Global dominance means setting the performance standard for customer satisfaction while increasing market share and profitability through the firm's convenience, value, and execution strategies. ? Improve an already strong position. The firm's strategies are simple and emphasize making customers happy with everyday low prices and outstanding restaurant operations so they visit more frequently. Further strategies are to increase market share by attracting more customers more often to increase profitability by being more efficient, and to create economies of scale.
Store Location (Distribution) ? Locate restaurants only on sites that offer convenience to customers and afford long-term sales growth potential. (The company utilized sophisticated site selection techniques to obtain premier locations. In the United States, the company supplemented its traditional suburban and urban locations with outlets in food courts, major airports, hospitals, and universities; outside the United States the strategy was to establish an initial presence in the central cities, then opening freestanding units with drive-thrus outside center cities).
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? Utilize store and site designs that are attractive and pleasing inside and out, and, where feasible, provide drive-thru service and play areas for children. Product Line Strategy ? Offer a limited menu. ? Expand product offerings into new categories of fast food (chicken, Mexican, pizza, and so on), and include more items for health conscious customers. McDonald's has been giving franchisees more leeway in trying out new ideas and new menu items apart from the core hamburgerand-fries selection. Pizza puffs and breakfast bagels are on the menu in certain locations and sandwiches are being sold at sharp discounts on selected days or times. In York City, a vegetarian sandwich is on at least one store's menu. ? Do extensive testing to ensure consistent high quality and ample customer appeal before rolling out new menu items system wide. The firm's "Made for You" just-in-time ordering system is available in nearly 10 percent of its outlets, promoting the theme and benefits of serving hotter food and producing cost savings from reduced waste. The combination of advanced equipment, sophisticated computer technology and new operation procedures will enable delivery of food "Made for You" at the speed of McDonald's. Store Operations ? Establish stringent product standards, strictly enforce restaurant operating procedures (especially concerning food preparation, store cleanliness and friendly courteous counter service), and build close working relationships with suppliers to assure that food is safe and of the highest quality. ? McDonald's' first priority is to improve restaurant operations. Strategic initiatives encompass realigning its structure and reducing its operations as a reaction to economic turmoil in certain international regions. Furthermore, the next generation of quality food preparation is being introduced to support its industry leadership into the next century.
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Relationships with its global network of suppliers add a dimension to its leadership position. Sales Promotion, Marketing, and Merchandising ? Enhance the McDonald's image of quality, service, cleanliness, and value globally via heavy media advertising and in-store merchandise promotions funded with fees tied to a percent of sales revenues at each restaurant. ? Continue to use value pricing and Extra Value Meals to build customer traffic. ? Use Ronald McDonald to create greater brand awareness among children, and the "Mc" prefix to reinforce the connection of menu items and McDonald's.
7 P'S OF MCDONALD’S
PRODUCT McDonald’s product portfolio primarily comprises of vegetarian and nonvegetarian burgers. The vegetarian burgers like Veg surprise, salad sandwich, Mc Aloo Tikki Burger, Mc veggie burger are offered to the customers. Nonvegetatarian burgers include Chicken Mc grill, Mc chicken burger, Fliet of fish and chicken maharaja burger. Along with these french-fries, veg pizza mc puff, wrap chicken Mexican, wrap paneer salsa, potato wedges, soft serve pineapple and chocolate ice creams, Mc swirl soft drinks, coffee and Mc shakes are also offered to increase the variety in the product portfolio. Mc Donald’s also provides mean combos with medium fries and medium soft drink, happy mean
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with small soft drink, econo meals with small soft drink and value meals with potato wedges and small soft drink PRICE McDonald’s vegetarian burgers are priced between Rs 20 and Rs 48. Wrap paneer salsa is priced at Rs 45-50. The non vegetarian burgers are priced between Rs 30 and Rs 60. Wrap chicken Mexican is priced at Rs 55. Medium French fries are priced at Rs 28, potato wedges at Rs 20, soft serves at Rs 35, mc swirl at Rs 12, medium soft drinks at Rs 20 and medium shakes a Rs 45. PROMOTION At McDonalds the prime focus is on targeting children. In happy meals too which are targeted at children small toys are given along with the meal. Apart from this, various schemes for winning prices by way of lucky draws and also scratch cards are given when an order is placed on the various mean combos. In fact, the various econo meals and value meals also signal to the customer that buying separate items results in greater value for money for the customer. PLACE McDonald’s outlets are very evenly spread throughout the NCR region. McDonalds does not offer home delivery but its outlets are very readily accessible. McDonalds also offers take away drive through facilities. PEOPLE The employees in McDonalds have a standard uniform and McDonalds specially focuses on friendly and prompt service to its customers from their employees. PROCESS The food manufacturing process at McDonalds is completely transparent i.e. the whole process is visible to the customers. In fact, the fast food joint allows its customers to view and judge the hygienic standards at McDonalds by allowing them to enter the area where the process takes place. The customers are invited to check the ingredients used in food. PHYSICAL EVIDENCE McDonalds focuses on clean and hygienic interiors of is outlets and at the same
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time the interiors are attractive and the fast food joint maintains a proper decorum at its joints.
MCDONALD’S AND HOTEL INDUSTRY
McDonald’s is one of the world’s strongest and most recognizable brands for its “world’s best quick service restaurant service experience” (Vandenbosch and Mark). This case study states that McDonalds plans to extend its brand into the hotel industry by opening a hotel in Illinois. The authors look at the hotel venture’s positioning options and the McDonald’s brand extension into a different product class. In order for McDonalds to successfully extend their brand into the hotel industry, they must manage their growth wisely, rely on the strength of their corporate brand, and consider what their customers really think their brand is. In the end, they must make sure that the extension of their brand brings meaningful perceived value to the consumers they target. Over the last decade, brand extension has become one of the hottest subjects in brand management. Extending a brand into a new category to capitalize on
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brand recognition and consumers’ trust can be a good choice for a few reasons. It can help lower costs, and add profits relatively fast while limiting financial risks because several products will promote each other under the same brand name. In many industries, launching a new brand is costly and so it seems logical that any company with such a huge brand name in the marketplace would decide to extend their brand in an economical way to quickly gain credibility in the new chosen marketplace. For the same reasons, it takes less time to educate the market with the extended services of an existing brand than to launch a new name from scratch. short period of time. McDonald’s is the leading global Fast Food service retailer with more than 30,000 restaurants serving millions of people in more than 100 countries. Very naturally, McDonald’s is the world's most famous, well-known, recognized brand in fast food restaurant category. From a managerial perspective, brand extension is a relatively fast way to add more to the bottom line in a relatively
SOCIAL RESPONSIBILITY OF MCDONALD’S
Founded in 1954 McDonald, now a multi billion dollar company is not only recognized for being fast, affordable and delicious but also for its contributions to the community. Their biggest proceeds go towards The Ronald McDonald House Charity. RMHC is a non-profit organization completely owned by McDonald Corporation. The purpose of the organization is to help families in financial need. RMHC provides room for the families of hospitalized children. So they are able to stay close to their children during their hospital stay. Without the help provided by RMHC, these families oftentimes could not afford to provide the support needed, to their kids. McDonald support programs that benefit children and families, through fund raising and charities for instance World Children's Day at McDonald. This fundraiser benefits RMHC chapters and other programs for children. They also contribute to women health care; all proceeds during Mothers Day go towards
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sponsoring the Women Owners Network (WON), which supports breast cancer work in the West. Another program sponsored by McDonald is The Make Activities Count (MAC), which provides grants to school teachers to support hands on programs that enhance student learning experience. Being apart of so many charities and programs help project a positive image on to the community, which enhances McDonald public image. Take a look at why a business like McDonald might get behind such a cause. Clearly, because helping children is an honorable and worthy cause. Nevertheless, it also provides good publicity for McDonald. Due to the fact that this publicity is worth millions to McDonald and it is money that will go directly into the pockets of McDonald shareholders. The millions spent are the result of the support of RMHC.
MCDONALD’S CORPORATE IDENTITY
Corporate identity is the most significant element to create and strengthen a company's industrial presence among the competitors. Corporate identity helps a company to establish a name in the consumer's mind and communicate its image to the target group from the shortest way. While exposing the positive sides among the competitors, it presents the first sights about the qualifications like quality, trust & stability If an organization is ruled by the principles rather than the managers or in other words if the principles remain unchanged although the managers are replaced and if that particular organization has qualifications and standards which separates it from the others than we can conclude that organization is a corporation. Corporations do not really need very strong managers. A manager's success in a corporation is measured by his ability to apply and adapt the existing principles. Main idea behind a corporate identity program is to explain the organization itself and its purpose explicitly in all the business done. Recent surveys indicated that average human brain is only capable of dealing with seven different units at most at the same time and
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also ranking them according to the priorities. Companies are bombarding the consumers with advertisements in the daily life. For instance one thousand and two hundreds of advertisements are aired per day on a channel in Germany. Products with no name and no specific producer have almost no chance in an environment like this. Although consumers say that they are not affected but the advertisements, they still prefer the brands they heard before or seen somewhere. They prefer the brands they recognize. How do the consumers recognize the brands? They are always facing the products but they do not have enough information about the producers. Because normally consumers do not have the opportunity to look around the production facilities, walk into the offices and get to know with the managers.
PROS AND CONS OF MCDONALD’S
Now a day every body will recognize the golden arches of McDonalds, it is hard not to. McDonalds has restaurants everywhere, beside major roads and in almost every high street. Their commercials are on television at least once a day. They became popular within a couple of years. Teenagers especially like McDonalds because of the relaxed atmosphere, cheap prizes and the fact that all over the world you know what you are buying. In restaurants I find that the waiters look at me and think that I might not be able to pay for the meal. With McDonalds I find that every person is welcome to come in and eat, no matter what you look like or how much money you have. There is also not a certain dress code that you have to oblige to. Fast food is easy to eat food that requires no cutlery. The fast food industry is not only good. The foods contain too much fat, salt and sugars. The food is not always what is said to be and uses a lot of packaging. Packaging that will be thrown on the ground, if the food is not eaten within the restaurant. People usually don't take the time to throw the packaging in the dustbins. The high streets usually have a whole carpet with litter of fast
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food restaurants. I think that the restaurants can't be responsible for the litter but the restaurants can do every thing to make their packaging as environmental friendly. People that eat at McDonalds do not always realize what happened to the cow before it turned into the hamburger. Mostly the animals are living in bad conditions. Chickens get born with foot disorders. But then again I guess that the animals the produce the meat for the top class restaurants suffer the same. The fast food industry advertises with the target of children. With there freebies and bright adverts the get children to make their parents take them to McDonalds.
MCDONALD’S CORPORATION IN THE NEW MILLENIUM
McDonalds Corporation in the new millenniummericanism meaning that they have now become the target of terrorist group and attack. Economic Challenges Economic Challenges McDonald’s must consider economic challenges when expanding internationally. Low set up costs rapid expansion one of the challenges for fast food industry is that to keep the price is low for the customer. Franchising facilitates set ups McDonald’s corporation provides financing assistance and training for new franchise owners to manage cash flow and keep businesses profitable. Social Challenges The main reason is the consumer’s worries had greatly increased with health fears so customers now opted for healthier options like subway which offered more of a variety for health conscious customers. Social Considerations Social Considerations To ease customers concern about health issues, McDonald’s has made changes to the following; McDonalds changed its image
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vastly by evaluating the current menu and making changes to it from using organic products to revising the whole menu entirely by offering salads and vegetarian burgers. McDonald’s serves a range of high-quality foods that can fit into a balanced diet. The accurate and accessible nutrition information help guests make informed menu choices. Social Considerations Emphasis on food safety: McDonald’s suppliers have food safety management systems in place, including Good Manufacturing Practices (GMP), a verified Hazard Analysis Critical Control Point (HACCP) plan and crisis management, food security and other applicable programs
Technological Advantages Technological Advantages McDonald’s has taken advantage of technology to streamline their processes and improve efficiency. Through technology enhancements such as FPI's Help Desk Service, network and application consolidation, and other technology implementations, operations of the company are greatly improved
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PRIVACY POLICY REGARDING CHILDREN
McDonald's is very sensitive to privacy issues. They are proud of our longtime commitment to their Customers. They are especially careful in any communications with one of their most treasured Customers - children. On our web sites, they offer many features, like games and coloring books, which do not require a child to provide any personal information. They collect only limited personal information from children 12 and under (like their email addresses) to respond to their online requests. For example, we may collect a Child’s email address in order to send the child a screen saver, but we promptly delete the email Address from their system. Or, they may collect a child's email address in order to enter the child in a Sweepstakes. They may also ask a child to provide an email address of a parent so we can notify the Parent or seek consent. We will not collect more detailed information from a child 12 and younger, Such as a postal address or a telephone number, without the consent of a parent or guardian. McDonald's will not condition a child's participation in any online activity on the child's disclosure of more personal information than is reasonably necessary to participate in that activity. Personal information collected from children is used solely by McDonald's or other entities that provide technical, fulfillment or other services to McDonald's. For example, such entities may provide
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services, such as, improving our web sites, fulfilling requests or administering sweepstakes. This personal information is not sold or transferred to third parties. They urge parents to regularly monitor and supervise their children's on-line activities.
INDIAN FAST FOOD SCENARIO
There are approximately 22,000 registered restaurants in India, which have sales of over $15,000 per month. In addition, there are more than 100,000 roadside restaurants (dhabas) selling their prepared foods in small stalls in cities and on highways. There are 1,568 registered hotels in India. The opportunity for U.S. food companies in India’s food service market is small but growing. Sales by Indian food service companies totaled approximately $6 billion in fiscal year 1998. Restaurants account for approximately 55 percent of Indian food service sales. The institutional sector consists of hospitals, prisons, defense establishments, schools, company canteens, railways and airlines. Indian Food Service Sub-Sector Sales FY 1998 100 percent = $6 billion
Excludes roadside restaurants
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Source: Literature search, Interviews, PSi analysis
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Factors driving increased food service sales
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Growth in Personal Income: The increase in buying power of Indian consumers is driving growth in the food service sector. India's per capita income has increased by over 20 percent from 1992 to 1996.
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Shrinking Household Size: The total number of households in India has increased by less than 3 percent per year from 1990 to 1998; however, the number of households in middle, upper and high-income categories has grown by more than 12 percent annually. These households have higher disposable income per member and have a greater propensity to spend on food.
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Urbanization: Approximately 50 percent of high, upper and middleincome group Indian consumer households reside in urban areas. Growing Number of Women in the Workforce: Over 16 percent of the population of Indian women work full-time and spend most of their time away from home. Due to these changes many Indian consumers are opting for meals away from home.
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Menu Diversification: High-income Indian consumers are seeking variety in their choice of food. Urban Indian consumers are aware of various international cuisine (e.g. Continental, Chinese, Mexican, Italian, Thai, and Japanese) and an increasing number are willing to try new foods
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A growing number of specialty restaurants, fast food outlets, and home delivery and take- away restaurants have opened in the last few years. A number of foreign restaurant chains (e.g. Domino's, Pizza Hut, Pizza Express, McDonalds, TGIF, KFC and Baskin Robbins) have started operations in India and have achieved success.
BEHIND THE COUNTRY
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Kroc’s Principles McDonald’s success is the result of its dedication to operating regimen. More than any other early competitor in fast food, McDonald’s was deadly serious as it went about the task of defining its operations, setting basic standards of achievement, and monitoring suppliers and operators to determine whether standards are being met. Kroc’s personal commitment to quality, service and cleanliness is legend. QSC long ago became the most popular acronym among fast-food operators, but the phrase originated with Kroc, and he used QSC to distinguish McDonald’s from all other competitors in an industry that was otherwise rife with duplication. QSC has now been changes to QSC & V, where V stands for Value for Money. In setting up its operating system, McDonald’s displayed no particular genius, just tenacity. To survive today, all fast-food chains must build central organizations to develop standards of operation and train the licensees to meet them. They must be responsible for picking suppliers and setting specifications on all food products. And finally, they must monitor the system to determine that the franchisees are following standards and that the suppliers are meeting product specifications. As logical and basic as that sounds, it was a revolutionary concept in food franchising when McDonald’s took that approach in the 1950s. In fact, McDonald’s greatest impact on American business is in the areas that consumers do not see. In their search for improvements, McDonald’s operations specialists moved back down the food and equipment supply chain. They changed the way farmers grow potatoes and the way companies process them. They altered the way ranchers raised beef and the way the meat industry makes the final product. They invented the most efficient cooking equipment and pioneered new methods of food packaging and distribution. The McDonald’s in India is following the same tradition. Long before the first Maharaja Mac was served up, McDonald’s was here in India, setting up the elaborate cold chain those supplies all the restaurants in the country. It took six years from 1991 when the work started, until the system was in place. “We
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spent Rs.50 crore – even before the first restaurant was set up in 1996,” Amit Jatia confesses.
SUPPY CHAIN MANAGEMENT AT MCDONALD’S
Did you know that every year, Rs. 50,000crores worth of food produce is wasted in India? This is mainly because of the lack of proper infrastructure for
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storage and transportation under controlled conditions. McDonald's is committed to providing quality products while supporting other Indian businesses. And so, we spent a few years setting up a unique Supply Chain, even before we opened our first restaurant in India. A Supply Chain is a network of facilities including - material flow from suppliers and their "upstream" suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their "downstream" customers at all levels. So, raw material flows as follows: supplier - manufacturer – distributor – retailer – consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about. When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect. Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond one’s immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized. For example, a diesel engine manufacturer may be able to integrate a GPS locator system into its engine control system. Its immediate customer, a heavy truck manufacturer, may see no need for this functionality. However, the downstream customer, a trucking company with a large fleet, may be very interested in a locator system. Understanding the value to the downstream customer is part of the supply chain management process. THE SUPPLY CHAIN OBJECTIVES The supply chain objectives are assured supply, low cost and safe and consistent quality. During 1990, when they first set out to outline their infrastructure, they found that the cold chain system was non-existent. There
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were only 200 refrigerated trucks across the country and very few cold storages. The cold storages were primarily used by the ice-cream sector and they were of very poor quality. The cold chain system set up involved the transfer of technology from McDonald’s in the US and its international partners. The standards also strictly adhere to Indian Government regulations on food, health and hygiene. Currently, McDonald’s distribution centers (DCs) are in touch with all the suppliers through electronic interconnectivity (e-mail). The supply chain converts the 15-day lead-time from the suppliers to a one-day ordering lead-time for the restaurant. The products are picked up in temperature- controlled vehicles by a third-party logistics company and delivered at the DCs. The DCs then supply to restaurants on a need-basis. All products go through the quality control checks before reaching the customer. According to Hard castle Restaurants national supply chain product manager Mr. S D Saravanan: “Traditionally, any supply chain functions through suppliers, stockiest, distributors, primary wholesalers, secondary wholesalers and retailers. However, at McDonald’s India, the supply chain involves only producers, distributors and retailers.”
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McDonald’s post-harvest facilities include a cold chain consisting of a vacuum pre-cooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of this crop is maintained between 1 degree Celsius and 4 degree Celsius and 95 per cent, respectively. Vegetables are stocked in the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid cooling to two degrees Celsius within 90 minutes. The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage. Thus, zero percent spoilage and freshness are being maintained. McDonald’s India sources food products through 45 different suppliers and 10 key local companies. The key local suppliers include: Vista Processed Foods (VPF), Trikaya Agriculture, Dynamic Dairy Industries, Radhakrishna Foodland, Cremica, Shah Bector and Sons, Global Green Company and Bector Foods. Another striking factor of McDonald’s is that it never has any written contracts with the suppliers. The relationship is only based on trust. The McDonald’s team help the suppliers develop, and hence they are assured that McDonald’s will stick to them through thick and thin.
Mechanism of each supplier
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Trikaya Agriculture, which is an intrinsic part of the cold chain and supplies fresh lettuce to McDonald’s at the rate of 300 metric tones per annum. The farm has the total capacity to produce 1,000 metric tones, per annum. According to Trikaya Agriculture Pvt Ltd farm manager Mr. M E Gowda: “Initially, lettuce could only be grown during the winters. With McDonald’s partnership, Trikaya is now able to grow the crop all round the year.” India, now supplies lettuce to five star hotels, flight kitchens, clubs and offshore catering companies. And it will soon be
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exporting to international markets, especially to McDonald’s Asia Pacific and Middle East operations.
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Vista Processed Foods (VPF) based in Taloja, Maharashtra, with technical and financial support extended by OSI Industries Inc, US, and McDonald’s Corporation Inc, US — operates infrastructure and support services. It supplies vegetable patties, chicken patties, pies and pizza puff at the rate of 30 metric tones per month to McDonald’s India.
? McDonald’s vegetable and chicken patties are processed through the latest food processing technological plant at Vista. Vista has installed hitech equipment for the purpose of deboning, blending, coating, passing the patties through the stern breading machine, frying and freezing.
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Vista’s pie line has the sophisticated, computerized Rondosheeter (the machine where processing takes place) in operation, which includes hi-tech refrigeration plants for the manufacture of frozen foods at temperature as low as minus 35 degrees.
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Dynamic Dairies: In some cases, the Indian suppliers had the technology but no market for the products they produced. For example, Dynamic Dairies through its relationship with McDonald's was introduced to a large consumer to supply milk casein and other milk derivatives. The two companies entered into a business relationship resulting in an initial export order of approximately US $12 million per year – with the potential to increase.
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After the food products are processed at their respective companies, they are received and stocked at the McDonald’s distribution partner — the Rs 80-crore Radhakrishna Foodland Ltd — to ensure that all McDonald’s restaurants are supplied without interruption.
The company however failed with potato farming, despite spending $10 million in Uttar Pradesh. But it claims that by 2004, McDonald’s will source potatoes from India for French fries. “With all 80 restaurants in place, we expect our consumption of French fries to be 10,000 metric tones and then it makes economics sense to grow processed grade potatoes in India,” says Jatia.
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However, the newly introduced potato wedges are being made from potatoes grown in Gujarat. HACCP’s There is a concept known as the HACCP’s followed in McDonald’s. HACCP’s stands for ‘Hazard Analysis and Critical Control Points’. There are some key areas identified by McDonald’s for e.g. the patties for the burgers have to be stored at a certain level of temperature. A list of these HACCP’s is given to all the suppliers and they have to strictly adhere to them. Surprise checks are made by the McDonald’s employees to check if all the quality standards are being followed.
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THE MEDIA MAGIC
“You deserve a break today, so get up and get away – to McDonald’s.” The above ‘break’ commercial was one of the initial commercial themes adopted by McDonald’s USA which became the best known commercial song on television and, in fact, the most identifiable advertising themes of all time. Needham was one of the first advertising agencies of McDonald’s, which made many revolutionary advertisements for the company. Needham’s advertising formula became known in McDonald’s as “food, folks, and fun,” and it remains the backbone of al the chain’s advertising campaigns. McDonald’s is now, one of the world’s mightiest consumer marketers. Its brand valuation is $25 billion, making it the ninth most valuable brand in the world. McDonald’s Marketing Strategy Worldwide The first step in developing a marketing strategy is to understand the customers, enabling reaction to their changing needs and the changing dynamics of the market. To this end McDonald’s conduct several stages of in-depth customer research and audits of the McDonald's brand. The research involving both quantitative and qualitative research methods. This research tells them a lot about how McDonald's is perceived and about trends that are taking place in the market. They also conduct research into the local area of their restaurants, into the general market environment, and into specific areas of their business, children for example. McDonald’s also had to have a thorough understanding of their competition. They consider 3 basic areas:
1. The Total Eating Out Market gives the broadest competitive context
and includes all restaurants, hotels, pubs, and any other outlet where people eat
2. They also focus on the Quick Service Restaurant sector. This includes
all the obvious competition and also fish and chip shops, and sandwich shops - any outlet where food is served quickly.
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3. The final sector that they focus on is defined as the Burger House
Sector. This looks only at restaurants serving hamburgers including Burger King, Wimpy, Wendy's and all independent burger bars. A useful way to gaining knowledge of all aspects of the competition is the examination of the four Ps of the marketing mix: Price, Promotion, Place, and Product.
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Competitive Promotion: Before they communicate with their customers they must be aware of what the competitors are communicating so that they can create a beneficial difference between McDonald’s and them.
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Competitive Pricing: Being in touch with the pricing of their competitors allows them to price their products correctly, balancing quality with value.
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Competitive Product: Quick Service Restaurants are constantly expanding their menus. This can be done on a short-term promotional basis or as a long-term expansion strategy.
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Competitive Place: Distribution is a key to any retailer or brand. Why Mudra in India?
DDB Needham and Leo Burnett are the advertising agencies of McDonald’s worldwide. Hence, when they came to India, the subsidiaries of both the companies pitched for the account and ‘Mudra’, the Indian partner of DDB Needham got the account. Since the very beginning Mudra has been the advertising agency of McDonald’s India. The Mudra team meets up with McDonald’s marketing team on a regular basis and they have a debate and discussion on the new strategies to be adopted. McDonald’s uses various Medias like television, hoardings and bus shelters. They are almost out of print ads. McDonald’s also sponsor many television programmes like Kaun Banega Crorepati, Children shows etc. Even the paper mats on the trays at the McDonald’s are designed as per the ongoing marketing strategy of McDonald’s. For e.g.: During the French fries
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issue, all their paper mats had description of the burgers, how the vegetarian products are made etc, to regain the confidence of the customers. The placing of the pamphlets, banners in and around the outlet is decided upon by the Area Sales Manager and the Operations Manager, in co-ordination with the Restaurant Manager. For e.g.: Currently they have the Bugs Life Theme going on wherein they give free Bugs Life toys with the Happy Meal. All the outlets are decorated with the pictures of the toys and even the paper mats have pictures of the toys on them. The hoardings around the outlets carry the same theme. The 80-20 Menu Boards Even the menu counters in the outlet are a marketing tool for the company. They have to be designed such that they catch the attention of the customer and tempt him to order the product. So McDonald’s have menu boards that are descriptive as well as visual. They call it the 80-20-menu board-eighty percent visual and twenty percent descriptive. The aim is to make things easier for the customer to understand what the 39, 49, 59, 79, 89 rupee options are. And of course it is easier for McDonald’s also to give back the one rupee change so that the service can be quick.
80-20 Menu Boards
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MARKETING STRATEGY OF MCDONALD’S
The marketing strategy of McDonald’s in India has gone through manly 3 stages: Stage I: Building the Brand Stage II: Awareness of the products Stage III: Gunning for market share. Stage I: Building the Brand The Stage Fright Advertisement (We make you smile!) The initial marketing strategy was focused on building the brand name in India. McDonald’s wanted to bring an awareness of its presence, of the arrival of McDonald’s in India. Hence, even thought it had presence only in 2 cities, Delhi and Mumbai, it still went in for Nationwide Advertising. The first advertisement of McDonald’s in India was of a child getting tensed in a Fancy dress competition and forgetting his lines. His father then takes him to McDonald’s where he forgets all his fears and gives a brilliant performance appreciated by all in the restaurant. Every child in India could relate itself to the child in the advertisement and it gave the parents the idea that if their child were unhappy, taking him to McDonald’s would definitely bring a smile to his face. When Vikram Bakshi was asked how the idea for the first advertisement came up, his reply was:“The idea came from the experiences of what we saw happening at the restaurants. I think one of the things that recent research has shown is that 69 percent of the kids prefer us. That kind of response is overwhelming! We have seen over a period of time that some of the things we set out to do in 1997-98 are paying off now. Really the kids are very happy to be here. They find it a hassle free experience. Nobody to say, "Sit down!" or "Don't move!" He is no longer told that if he runs around he will bang into someone and spill things over. He doesn't encounter adults all the time like he does in specialty restaurants-waiters who are in their thirties and forties, with faces which say, "Keep out of my way!" What he sees when he comes into McDonalds is a place that is brightly lit-there are no dark corners that he needs to be scared of. The people working here are all young. He can walk up alone to
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the counter and ask for whatever he wants, someone will talk to him, take him seriously, look after him, ask him questions. He has a play area where he can run around. And clearly even parents are happy to bring their children here. I have seen many instances where parents come in with their children; they are playing while the parents are also enjoying themselves. There was this lady I met and she asked me, "What is this that you do to children?" So I said, "What do we do meaning?" She said, "My two year-old recognizes McDonalds. When I took her to Wimpey’s the other day she refused to enter the place, saying it was not McDonalds." Stage II: Awareness of the Products McDonald’s then felt that it needed to highlight its products along with the experience. Hence, the series of advertisements highlighting on the products and new launches of McDonald’s. McDonald’s wanted the customers to know that they have something for everybody, be it children or adults, vegetarian or non-vegetarian. The advertisements in these series were:
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The Sleeping Couple: In the sleeping couple advertisement the husband is shown dreaming about the various products of McDonald’s. Anyone watching the advertisements felt like going to McDonald’s right away.
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The Police and Thief: The thief is on a run from the police but makes a stop at McDonald’s to have the new McPizza Puff and the Chicken McGrill.
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The Barber and the Customer: The customer is getting himself shaved when he hears about the launch of McPizza Puff and Chicken McGrill, and runs to the nearest McDonald’s half shaved.
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The Runaway Bridegroom: A couple is getting married when the Bridegroom runs away in the middle of the marriage to have the new McPizza Puff and the Chicken McGrill and the whole family follows him.
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Veg Surprise: The latest commercials, around 3 of them, are focused on the launch of the new Veg Surprise for Rs.17 only with the punch line “Yakein hi nahin hota”.
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Stage III: Gunning for market share The latest advertisements of McDonald’s are a transition from the first strategy. In the initial advertisements, McDonald’s was attempting to build a relationship with the customers. But now, the advertisements portray that the relationship has already been established. It’s got the mind share, and its now gunning for market share. The ad campaigns are trying to portray McDonald’s as a constant companion, which makes people feel special. The recent commercial highlights the bond that McDonald’s shares with people. It shows a child moving to a new locality, and he is sad. But when he sees McDonald’s in his neighborhood, the child is once again reassured. The recent ad campaign is targeting the Indian is targeting the Indian father, as he is still looked upon as a decision-maker. The new positioning: McDonald’s is a special place where caring dads take their families to give them a great time. So it’s a clear positioning as a family restaurant. “We are positioning ourselves as the welcoming and affordable family restaurant committed to values of quality, fun and excitement. It is also a restaurant which makes you feel special and makes you smile”, says Amit Jatia. Miscellaneous Advertisements There were many other advertisements made by McDonald’s emphasizing on the schemes, the prices and various other aspects. Some of them were:
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The ‘Itch Karo’ Scheme: This advertisement was to promote the scheme of McDonald’s wherein you could win prizes right from a small Cadbury to a television and bike.
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Soft Serve Cone: There were many advertisements focusing on the Rs.7 soft serve cone. One of them was of a traffic policeman who gets tired of directing the customers to the McDonald’s outlet. This advertisement if of the most liked and remembered advertisements of McDonald’s.
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Happy Meal: There are various advertisements relayed during children programmes on television and also children channels emphasizing on the happy meals and the toys you get with them. The French Fries Issue
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On May 4th 2001, the outcry over the alleged use of beef flavoring in the preparation of French fries by McDonald’s led to attacks on two outlets in Mumbai and Thane. Within hours of the story breaking that McDonald’s in the U.S. had been using oil with a beef extract for cooking its fries, the burger giant’s Indian operation knew it had a crisis on its hands. Amit Jatia and his staff huddled together with PR specialists from Corporate Voice Shan wick, ad men from Mudra DDB, corporate affairs and legal experts. Police security for all outlets was first red alerted. Then, posters were made from office printers with the headline: “100 percent Vegetarian French Fries in McDonald’s India.” Below this were various bullets of information such as: “No flavors with animal products/extracts are used for preparing any vegetarian products in India.” The posters were plastered over all the Big M outlets. The main imperative was to supply proof. On the day the story broke in India, McDonald’s submitted samples of the fries to leading laboratories in Pune and Mumbai, such as the Council of Fair Business Practices, as well as Delhi’s Central Food and Technical Research Institute. Tests were quickly done by the BMC (Bombay Municipal Corporation) and FDA and local political parties. It took a week but the results were clear – no beef or meat in the oil or products – which were rapidly passed to the press. The results were also posted in the various outlets and put as inserts in the daily papers in sensitive areas like Bombay’s Vile Parle, Charni Road and Thane district. All these marketing efforts helped the Big Mac to avert the crisis and regain the confidence of the customers. For a few days after the news, the sales dropped drastically, but now, the outlets are back to their usual footfalls and french fries remain the most favorite and most selling product of McDonald’s India. Where’s Ronald McDonald?? In countries like Australia and U.K, where McDonald’s has its presence since decades, many of the marketing strategies have been focused on Ronald
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McDonald and his friends like Ham burglar, Grimace etc. Ronald McDonald is a prominent figure in the children’s life of those countries. The very first Ronald McDonald was the famed weatherman Willard Scott. In the very first Ronald McDonald commercial, with Willard Scott as Ronald (c.1960), he actually says something to the effect of "I know you're not supposed to talk to strangers, kids, but its okay to talk to me, because I'm Ronald the hamburger-loving clown!" Originally he wore shoes made of buns, a cup on his nose, and a hat with a hamburger meal on it. Soon, this was dropped for the more familiar clown outfit. But in India, none of the advertisements currently focus on Ronald McDonald. The main reason for this being, the Company is still trying to build the brand loyalty and awareness in India. It is still in its developing stage and cannot focus on many aspects at the same time. Social Marketing McDonald’s believes in giving back to the community in which they do business. Besides commercial marketing McDonald’s also undertakes many social drives to build brand loyalty among the customers. Ronald McDonald House Charities (RMHC) works to improve the health and well being of children by awarding grants to organizations and supporting 206 Ronald McDonald Houses worldwide. RMHC has not yet been established in India. But McDonald’s India has undertaken many social activities like: • Supporting Health drives like Pulse Polio since 1998.
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McDonald’s Spotlight, an inter-school performing arts competition started in 1998 for schools all over Mumbai and Navi Mumbai to provide the students with an atmosphere for healthy competition. Over 120 schools participated in 1998, 1999 and 2000.
• McDonald’s has tied up with Nehru Science Centre, Mumbai (NSCM) in 2000 for a period of three years to bring the students of
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Mumbai a science quiz. This quiz has been conducted by NSCM for the past ten years. With McDonald’s, it hopes to get the contest to a new level.
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Having cleanliness drives with the BMC – like the one on 15th August 1997 for making Mumbai garbage free and joined in celebrating 50 years in India’s independence.
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HUMAN TOUCH
We're not just a hamburger company-serving people; we're a people company serving hamburgers.
With more than 500,000 people on the payroll at any one time, the McDonald’s System is easily one of the largest employers in the United States. One out of every 15 American workers got his or her first job from McDonald’s. It was at McDonald’s where they first learned about work routines, job discipline, and organizational teamwork. McDonald’s by now had replaced the U.S. Army as the nation’s largest job training organization. An unwritten rule during McDonald’s first decade prohibited the hiring of women in the restaurants. It was rationalized on the grounds that many tasks – such as carrying hundred-pound sacks of potatoes from the basement – were too strenuous for the women. But that was a thinly veiled disguise for the real reason: Kroc feared that female employees would attract too many teenage males who would convert McDonald’s into another high school hangout. But Kroc’s worst fears that attractive female crewmembers would convert McDonald’s into a teenage hangout proved unfounded and today, McDonald’s crews are 56 percent female, and fully women manage 46 percent of all units. Hamburger University Hamburger University is McDonald's worldwide management training center located in Oak Brook, Illinois. Designed exclusively to instruct personnel employed by McDonald's Corporation or employed by McDonald's Independent Franchisees in the various aspects of the business. All training programs begin with one essential ingredient: The Basics of McDonald's Operations.
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Founded in 1961, Hamburger University's has come a long way since McDonalds opened their first training facility in the basement of a McDonald's restaurant in Elk Grove Village, Illinois. Since that time they've moved Hamburger University twice and watched the size of classes grow from an average size of about 10 to more than 200 per class. Today, more than 65,000 managers in McDonald's restaurants have graduated from Hamburger University, now located in a 130,000 square foot, state-of-theart facility on the McDonald's Home Office Campus in Oak Brook, Illinois, with a faculty of 30 resident professors. Because of McDonald's international scope, translators and electronic equipment enable professors to teach and communicate in 22 languages at one time. McDonald's also manages ten international training centers, including Hamburger Universities in England, Japan, Germany and Australia. Equal Opportunities Policy McDonald's is an equal opportunity employer, ensuring that employees and job applicants are selected, trained, promoted and treated on the basis of their relevant skills, talents and performance and without reference to race, color, nationality, ethnic origin, gender, sexual orientation, marital status, age or disability. The company aims to ensure that no job applicant or existing employee is disadvantaged by conditions, requirements and policies that cannot be shown to be just and fair in support of this McDonald's Diversity policy promotes and sustains a working environment, which is free from unlawful discrimination, harassment and bullying. McDonald's regards all of its employees as members of a team where everyone's opinion is valued and everyone is regarded as equal in status and must always be treated with respect. The person responsible for this policy is the Human Resources and Training Director, but it is the responsibility of all employees, particularly managers and area management, to challenge questionable behavior and practices. The Human Resources department monitors the effectiveness of the policy at regular intervals and takes corrective action as necessary to ensure that it is being complied with. Employees who feel that they have been unfairly treated
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in any way regarding this policy are encouraged to use the remedies outlined in the Company's handbooks. Outlet in India McDonald's India is an employer of opportunity, providing quality employment and long-term careers to the Indian people. The average McDonald's restaurant employs more than 100 people in 25 different positions – from cashier to restaurant manager. McDonald's world class-training inputs to its employees can be seen in the present close to 2000 employees currently in Mumbai and Delhi. ? Manpower Planning: The Scheduling Manager is in charge of the manpower planning in the outlet. They have full timers who work for 9 hours and part timers who work for 3-4 hours. If they expect more customers (during holidays etc) then more part timers are recruited.
? Recruitment: Done by reference of the employees in the outlet or other
outlets. ? Organization and Salary Structure:
R e s t a u r a n t ( R s . 1 8 , 0 0 0 M a n a g e r 2 0 , 0 0 0
)
1 s t
A s s i s t a n t M a n a g e r ( R s . 1 1 , 5 0 0 )
2 n d
A s s i s t a n t M ( R s . 1 0 , 4 0 0 )
a n a g e r
S
h i f t
R u n n i n g ( R s . 6 , 5 0
F l o o r 0 )
M
a n a g e r
F l o o r M a n a g e r ( R s . 5 0 0 0 )
T r a i n i n g ( R s . 2 1 p
S q u a d e r h o u r )
C ( R
r e w M e m b e r s . 1 4 . 5 p e r h o u
r )
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? Training and Development:
Training is a continuous process at the McDonalds. It is the responsibility of the training squad to train the other employees. The training squads maintain training logs of the employees, which clearly states that which employee is to be trained, and on what station.
? The 3/30 Plan: According to this plan, the training squad has to train 3
people on three different stations in a month. One employee is trained on one station, say the vegetarian station for 10 days, and then for the nonvegetarian station for the next 10 days and so on. This is done till the employee becomes proficient on the station and is capable of handling the station on his own. ? Performance Appraisal: Every employee joins in as a Trainee Crew where he is given the Green Badge. After a period of 3 months, the employee is checked for the health safety, cleanliness and sanitation after which he is given the Yellow Badge. After receiving the Yellow Badge, there are 5 stations that the employee has to be proficient in:
1. Backroom Cleaning – This includes mopping the floors, clearing the
tables, maintenance of the machines etc.
2. Fried Products – This involves frying of the French Fries, Pizza Puff
etc. to the right degree.
3. Buns, Dress and Grill (BDG) – This includes grilling the bun and
dressing them properly. There is a time limit given to perform every function and the employee has to perform it efficiently, with minimum wastage.
4. Counter – The last station is of the counter handling. The employee
should be able to converse with the customers courteously and take proper orders.
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5. Personality – The last criteria is the overall personality of the
employee. McDonalds being in the service industry, having smart and courteous employees is of utmost importance to them. • The productivity record has to show 90+ points. The productivity is checked in various ways. For example – McDonalds has a policy if serving each customer within one minute on an average. The productivity at the counter is checked by the time taken by an employee to complete the order. For E.g.: If Freda (A service-counter in charge) has taken 2.5 minutes on a average to serve each customer in her shift, at the end of the shift, the shit running manager will speak to her and ask her the reason and accordingly ask her to try and improve. If this trend continues, Freda is trained further. • After the productivity record shows 90+ points, the employees have to appear for a documented written test where they must get more than 90 marks. • Having got a 90+ average of the two, the employee is promoted to the next hierarchy level. ? Shifts: McDonalds have different shifts for managers, full time employees and part time employees. Their main shifts consist of: ? Open Shift – 7:00 am to 4:00 pm ? Mid Shift – 12:00 am to 9:00 pm ? Close Shift – 3:00 am to 12:00 pm • McDonalds have a special night shift where the managers have to account for the day’s transactions, inventory, wastage etc. The night shift for the mangers is from 11:00 pm to 8:00 am. • They also have a night shift for the employees where the scrubbing of the entire outlet takes place. Also, each and every machine is opened and cleaned. The night shift for the employees is from 7:00 pm to 4:00 am.
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• Both the night shifts i.e. for the managers and the employees are done on rotation basis. Female employees are generally not allowed to do the night shifts. ? Holidays and Breaks: • The crew members are allowed to take 4 holidays in a month and the Managers can take 6 holidays in a month. • If an employee is working for the 7-hour shift, he gets a break for 1 hour after 4 hours and if an employee is working for less than 7 hours, then he gets a break for ½ hour. ? Employee Grievances: McDonalds call it as the RAP SESSIONS. Once in a month, the employees can vent their problems to the Area Sales Manager or the Operations Manager. The Branch Manager is not included in the Rap Sessions. ? High Employee Turnover McDonald’s in India faces a huge problem of high employee turnover. Recruiting and training employees is an ongoing process, which never stops at any of the outlets. On an interview with one of the ex-employees, it was found that the main reasons for the high employee turnover are:
•
The profile of the employees mainly consists of college students who want to used their spare time and get some fast money. As a result the turnover is extremely high during the exam seasons, and similarly, the availability is high during the holiday’s seasons.
• The employees feel that there is very slow growth in the company. It takes you 3 months just to get the yellow badge, and even after that, the promotions come very slow. • The salary packages are not very attractive.
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Changes in Consumer Perceptions
1999 From serving just Burgers
2001 To ice-creams, fries, shakes and pizza
Bland western food
Less spicy, non-oily, crisp, fresh and different
Expensive western restaurant
Affordable family restaurant, money well spent
Loud, for youngsters
Mature, calm, cultured, straightforward for families
Childish
Childlike, and young at heart
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Steps taken to improve customer service:
•
Guard placed at the entrance: From this year onwards, a guard has been placed at all the entrances to greet and welcome the customers Host and Hostesses: More employees are now placed in the front area than the back area to interact with the customers. Mystery Diner: Delegates of the company visit the outlets as normal customers and check if the service is being given properly and then report to the Head Office. These surprise checks keep the employees on their toes.
•
•
•
2 Meter Rule: Any employee coming within 2 meters distance of any customer has to greet and smile at the customer. Served in 60 seconds: This is an upcoming scheme of McDonald’s wherein every customer will be served within 60 seconds and if they are unable to do so, the customer will get free French fries. This scheme is going to be launched in McDonald’s Asia-wide.
•
•
Standardization: At McDonald’s, the way of doing each and every thing has been written down, and so has been the way to take down the order from the customer. They follow a 6-step rule. As soon as the customer comes to the counter they have to: 1. Welcome the customer 2. Take the order 3. Repeat the order 4. Take money 5. Give the ordered products 6. Greet the customer
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THE ROAD AHEAD
McDonald’s, that has become synonymous with urban living, is all set to break boundaries and go national. It is doing this through the arteries of the country — the national highways and expressways. Puckish travelers zipping from city to city will no longer have to be content with dhabas offering dal-roti. They can look forward to biting into burgers, french fries, McPuffs etc all. McDonald’s (India) is planning to start drive through restaurants on express highways across India. The first is being planned on the Mumbai-Pune highway this week and plans are afoot to have three more on the National Highway No. 1 in north India.For hungry drivers on the run, the company promises to deliver within 60 seconds after an order is placed. Theoretically, one can be back on the highway in just two minutes. Of course, the practical reality is that placing the order it could take a little bit more than the said two minutes. McDonald’s is projecting an income of 15 to 20 per cent from drive-through business on expressways in the immediate future. This is expected to grow to 40 per cent in the next five years. The company had a tied-up with public sector oil company Bharat Petroleum to set up restaurants at petrol pumps across northern India. Commenting on the clientele for the restaurant on the Mumbai-Pune expressway, which to be launched first, Amit Jatia, managing director, McDonald’s restaurant, Mumbai said, “We are expecting business traveller to frequent the outlet. Our survey reveals that 15,000 to 20,000 vehicles use the highway everyday. Of this, passenger traffic is around 12,000 vehicles per day and the rest is commercial. Besides the vehicular traffic, we are also targeting nearby towns to sustain business.” McDonalds will have to face competition from the more affordable dhabas, the roadside eateries that dot highways all over the country. The company’s confidence stems from a model already in place in north India. McDonald’s has a 170-seater restaurant at Noida near Delhi. “The restaurant at Noida attracts a lot of drive through business. Around 30 per cent of sales at this outlet are from drive through clientele like tourist buses and passenger
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traffic, that is, the business traveller,” said Vikram Bakshi, managing director, McDonald’s restaurant, New Delhi. McDonald’s is closely looking at options on National Highway. One as it is considered to be on of the busiest highways in India. “In the immediate future, we plan to have three restaurants on this highway — one each at — DelhiJaipur highway, Delhi-Ambala Highway and Delhi Ludhiana highway,” Bakshi added. While, an extension to expressways may be a recent development, it has been arrived at after looking into the business prospects, logistics and supply chain. Jatia says, “Drive through restaurants is only one of the options to meet McDonald’s target of 80 restaurants across India by 2003 with an investment of Rs 850 crore. Internationally, 40 per cent of the company’s business is from express highways.” With a strong backing of reliable supply chain, extensive advertising and efficient employees, McDonald’s is trying to fulfill all the customer challenges. Hence, we can truly say that ‘McDonald’s mein hain kuch baat!”
MCDONALD’S CASE STUDY
McDonald’s, the long-time leader in the fast-food wars, faced a crossroads in the early 1990s. Domestically, sales and revenues were flattening as competitors encroached on its domain. In addition to its traditional rivals— Burger King, Wendy’s, and Taco Bell—the firm encountered new challenges. Sonic and Rally’s competed using a back-to-basics approach of quickly serving
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up burgers, just burgers, for time-pressed consumers. On the higher end, Olive Garden and Chili’s had become potent competitors in the quick service field, taking dollars away from McDonald’s, which was firmly entrenched in the fastfood arena and hadn’t done anything with its dinner menus to accommodate families looking for a more upscale dining experience. While these competitive wars were being fought, McDonald’s was gathering flak from environmentalists who decried all the litter and solid waste its restaurants generated each day. To counter some of the criticism, McDonald’s partnered with the Environmental Defense Fund (EDF) to explore new ways to make its operations more friendly to the environment. Facts McDonald’s roots go back to the early 1940s when two brothers opened a burger restaurant that relied on standardized preparation to maintain quality— the Speedee Service System. So impressed was Ray Kroc with the brothers’ approach that he became their national franchise agent, relying on the company’s proven operating system to maintain quality and consistency. Over the next few decades, McDonald’s used controlled experimentation to maintain the McDonald’s experience, all the while expanding the menu to appeal to a broader range of consumers. For example, in June 1976, McDonald’s introduced a breakfast menu as a way to more fully utilize the physical plant. In 1980, the company rolled out Chicken McNuggets. Despite these innovations, McDonald’s tremendous growth could only continue for so long. Its average annual return on equity was 25.2% between 1965 and 1991. But the company found its sales per unit slowing between 1990 and 1991. In addition, McDonald’s share of the quick service market fell from 18.7% in 1985 to 16.6% in 1991. Plus growth in the quick service market was projected to only keep pace with inflation in the 1990s. McDonald’s faced heightening competition on several fronts. First, its traditional rivals—Burger King, Wendy’s, and Taco Bell—were eating into its margins through promotions and value pricing strategies. Taking a leaf from McDonald’s own playbook, Sonic and Rally’s were using a very limited menu
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approach to attract time-strapped consumers. Finally, Chili’s and Olive Garden were appealing to diners looking for something a little more enticing that the familiar Golden Arches for their families. In the late 1980s, McDonald’s began recognizing the importance of maintaining an ecologically correct posture with the public, which was becoming more concerned about the environment. For example, in 1989, 53% of respondents in one survey revealed that they had not bought a product because they didn’t know what effect the packaging would have on the environment. Closer to home, a 1990 study showed that each McDonald’s generated 238 pounds of on-premise solid waste per day. It’s no surprise, then, that McDonald’s sought a way to reduce its solid waste while providing a more environmentally acceptable face to the public. Beginning in 1989, it partnered with the Environmental Defense Fund, a leading organization devoted to protecting the environment, to seek ways to ease the company’s environmental burden on the landscape. Together, EDF and McDonald’s considered its impact on a wide range of stakeholders—customers, suppliers, franchisees, and the environment. The company gave its franchisees much autonomy in finding ways to eliminate environmental blight. The company’s hope was that from these divergent approaches, it stood a greater chance of finding solutions with broad applicability than if it had tried to pursue a one-size-fits-all approach from the outset.Some of the environmentally inspired solutions that came out of the collaboration with EDF were the: • Introduction of brown paper bags with a considerable percentage of recycled content. • Solicitation of suppliers to produce corrugated boxes with more recycled content, which had the twin effect of reducing solid waste and building a market for recycled products. • Abandonment of polystyrene clamshell containers to hold sandwiches in favor of new paper-based wraps that combined tissue, polyethylene, and paper to keep food warm and prevent leakage.
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Analysis
McDonald’s Sustained Prosperity The secret of McDonald’s success is its willingness to innovate, even while striving to achieve consistency in the operation of its many outlets. For example, its breakfast menu, salads, Chicken McNuggets, and the McLean Deluxe sandwich were all examples of how the company tried to appeal to a wider range of consumers. The company has also made convenience its watchword, not only through how fast it serves customers, but also in the location of its outlets. Freestanding restaurants are positioned so that you are never more than a few minutes away by foot in the city or by car in the suburbs. Plus McDonald’s is tucking restaurants into schools, stores, and more. Key Threats The key threats to McDonald’s domestically are the lack of growth opportunities. The market is well saturated, and it would difficult to achieve double-digit growth. Other concerns are a newfound emphasis on healthier eating. Most of McDonald’s most popular fare probably in some small way contributes to the increasing incidence of cancer, heart disease, and diabetes among the population. But I feel the key threat to McDonald’s continued success is its very ubiquity. Because McDonald’s are everywhere, the dining experience is never special. And as Baby Boomers age and become more affluent, it is likely that they will leave behind their fast-food ways, if only to step up to moderately priced restaurants like Olive Garden, Bennigans, and Pizzeria Uno. These chains have the added advantage of serving higher-margin alcoholic drinks. McDonald’s, meanwhile, has to continually battle Burger King and Wendy’s, which leads to an erosion of margins for everyone. Even alliances with toy manufacturers, while popular with consumers, do little for the bottom line because the cost to run these promotions can be quite expensive. Responding to Burger King’s October 1 Announcement
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The October 1 announcement from Burger King that it would begin offering table service is not much of a threat at all. You can try to dress up fast food, but its still fast food. I couldn’t imagine this being a potent draw for consumers. McDonald’s best course is to ignore this development as irrelevant. As the market leader, McDonald’s does not need to respond to every competitor’s initiative. Indeed, doing so would have the effect of making McDonald’s look reactive and less like a leader. The advantage of not responding to Burger King’s initiative is that the company can preserve its resources for other marketing thrusts that may provide a bigger payoff. The disadvantage of not responding to Burger King’s initiative is that you allow the firm to establish itself in a unique way in the minds of consumers —that of a fast-food restaurant that provides sit-down service. But again, is this inherent contradiction of fast-food fare and upscale dining experience likely to resonate with consumers? I would say no. If Burger King’s initiative does prove popular with consumers—as evidenced by expanding sales and market share—McDonald’s would be forced into catch-up mode. But I think that this is a risk that the company should be willing to take. Promoting Flexibility through Its Operating Strategy The key thing that McDonald’s operations strategy has to support is experimentation. Now somewhat long in the tooth, McDonald’s needs a breakthrough that will provide new avenues of growth. It has a long history of such experimentation, which has resulted in some new profit centers like Chicken McNuggets and the breakfast menu. Some later turn out to be duds like the McLean Deluxe, but inevitably experimentation in limited outlets offers McDonald’s a way to retain its key strengths—quality and consistency— while continuing to evolve for new palates and pocket books. McDonald’s and the Environmental Defense Fund In some ways, partnering with the Environmental Defense Fund was a masterstroke. It brought both respectability and valued expertise to its environmental efforts. It also provided a primetime venue for EDF to make a
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difference. Any successes, even if only incremental improvements, would have major ramifications because of the sheer size of McDonald’s operations. McDonald’s should continue its partnership with EDF. With ecology a growing concern among consumers, it makes sense to be a good corporate citizen and get all the public relations accolades that go along with such an alliance. It also pays off in the bottom line by reducing shipping costs for supplies as well as garbage removal fees. McDonald’s would do well to stay in the vanguard of corporations who have become environmentally aware. If it tries to shirk its responsibilities, it can foresee a public relations nightmare in the making. But if it does manage to come up with some breakthroughs through its collaboration with EDF, it can score a tremendous amount of goodwill with the public, which may even provide a halo effect to mitigate any other PR troubles. How far should McDonald’s go on environmental issues? There is definitely a public relations benefit in being seen as an environmental leader, and the collaboration with EDF goes a long way in making that happen. Still McDonald’s has had a lot of success in giving its franchises some latitude in developing new solutions. The line in the sand in determining how far McDonald’s should go with its environmental efforts is determined by the cost of the initiative relative to the hard-dollar benefits and harder-to-quantify public relations buzz it gets from being in the forefront on environmental issues. The bottom line is that environmental efforts can’t detract the company from its primary mission of providing consistent quality to consumers. If environmental efforts start to be a drag on the company’s future profits, it’s time to ease up. Ideally environmental initiatives should pay for themselves by reducing other kinds of costs. Dealing With the Product Range Explosion McDonald’s had done well with a fairly limited product range. But falling per unit sales is a danger sign for the firm. With competitors gaining ground on McDonald’s, it may indicate a need to refresh its product line. Perhaps the best way to do that is by rotating in a couple highly promoted new menu items. This
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would have the effect of enlivening the product menu, without the need to go head to head with competitors on price. This slackening of per unit sales might also indicate that McDonald’s critical success factors have changed. Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm. At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for dinner consumers. To maintain consistency in new products as it expands the product line, McDonald’s must rely on test marketing new menu items in pilot locations. This approach will let the firm identify which items are likely to prove popular with consumers while ensuring that the company can deliver new products with consistent quality nationwide. McDonald’s already has a history of doing this so it will not require major changes to its operations strategy—at least initially. If the product line-up gets too large, then the task of maintaining quality becomes exponentially harder. The trick is to consider how to eliminate some of the existing menu items when you introduce new ones, while making sure the staff is fully trained in how to execute these products successfully. Because McDonald’s has pretty well saturated the U.S. market, it’s only real opportunities for growth lie abroad, where the competition is not so cutthroat or by introducing new restaurant concepts under brands other than McDonald’s. After all, McDonald’s is known for fast food. It’s not really a pleasant dining experience, just a cheap and convenient one. I feel that McDonald’s has reached the point of diminishing returns with the McDonald’s brand and now needs to roll out new types of restaurants. Indeed, McDonald’s has the opportunity to apply its core competencies— scrupulous adherence to quality standards and continual promotion of experimentation—in new venues. Imagine if you will, McDonald’s opening a new casual dining restaurant under the name of Splendor. It could then franchise that concept nationwide and get some of the dollars from consumers who have grown past fast food. But its fastidious approach to operations would ensure that consumers everywhere would experience the same dining
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experience—a tremendous advantage for consumers who don’t want to be surprised with a bad meal. McDonald’s could try a number of concepts simultaneous in different parts of the country. Those that seemed promising could be rolled out further. The duds could be left to die quickly. While this will be an expensive undertaking, it holds the potential to unleash new areas of growth in a maturing market. In brief McDonald’s faces some difficult challenges. Key to its future success will be maintaining its core strengths—an unwavering focus on quality and consistency —while carefully experimenting with new options. These innovative initiatives could include launching higher-end restaurants under new brands that wouldn’t be saddled with McDonald’s fast-food image. The company could also look into expanding more aggressively abroad where the prospects for significant growth are greater. The company’s environment efforts, while important, should not overshadow its marketing initiatives, which are what the company is all about
EMPLOYMENT OPPORTUNITIES & BENEFITS
Macdonald Page offers a variety of employment opportunities, including:
• • •
Positions for experienced CPAs; Positions for recent college graduates with an accounting degree; Internships for college juniors who are enrolled in accounting programs; service experience.
• Opportunities for bookkeepers with payroll, general ledger, and client They also offer: • Competitive salaries
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• A comprehensive benefit package, including liberal personal time, minimal waiting periods for enrollments to 401(k) and multiple health plans; • Continuing professional development and education reimbursement; • Quality of life programs including: half day Fridays during summer months; year-round corporate casual business attire; on-site parking; limited overnight travel; and flexible work schedules; • A commitment to computer technology; • Broad client base with industry specialization; • Advancement opportunities; • A mentoring program; • Confidential interviews.
SURVEY OF CUSTOMER
?
Objective of the survey: To find out the perception of McDonald’s in the minds of the customer. Methodology: Primary data was collected as it gives first hand information and also the data can be adjusted according to the needs. The tool used was the questionnaire method. This method was chosen as it obtains standardized results that can be tabulated and treated statistically. A broad category of the questions asked were: 1. 2. 3. Frequency of visit Favorite Product Favorite Advertisement
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?
4. 5. 6. 7.
?
Is McDonald’s value for Money? French Fries Issue Unique Selling Proposition of McDonald’s Suggestions to improve McDonald’s
Sample: I conducted a survey of around 100 customers of McDonald’s. The profile was mainly distributed in 3 categories: Categories Below 15 years Number of Customer Interviewed 28 customers 42 customers 30 customers
Between 15 years to 25 years Above 25 years
?
Processing of Data: The data collected from the questionnaires was tabulated and the percentages were derived. For e.g.: If out of 100 customers, 54 are veg and 46 are non-veg, the percentages where taken and analyzed.
The findings of the survey were as follows: Ratio of Vegetarians and Non-Vegetarians visiting McDonald’s
The percentage of vegetarian people visiting the restaurant is slightly more than the non-vegetarians. The vegetarian customers feel a lack of choice in the products as compared to the non-vegetarians who seemed to be comparatively
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satisfied. Since McDonald’s has an equal footfall of vegetarian customers, it would be advisable to increase its vegetarian product line.
Favorite Product
Even after the big issue over french fries, they remain to be the most favorite product of most of the customers of McDonald’s. Some of the customers love to visit McDonald’s just to have the French fries. The McChicken Burger and the McVeggie Burger are the second favorites.
Do you find the product line satisfactory?
Only 32% of the customers find the product line satisfactory. Rest all of them find it either okay or not satisfactory at all. Customers would like to have more variety to choose from. They feel that McDonald’s should include more deserts and more items like the Pizza McPuff besides the burgers. Favorite Advertisement
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The first advertisement of McDonald’s (Stage Fright) remains to be the most popular and recalled advertisement. While these advertisements are very popular amongst the children and teenagers, 26% of the customers, mostly consisting of the elders failed to remember any of the advertisements or simply said that they didn’t like them.
Do you find McDonald’s value for money?
Most of the parents gave a positive answer to this question, but the teenagers and customers below the age of 25 didn’t find McDonald’s value for money at all. The main reason for the parents preferring McDonald’s is because their children’s like it and hence they don’t mind paying any amount. The customers below 25 years find it a good place to hangout and like the food, but don’t find it worth the cost. Problems faced in the visits to McDonald’s
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Long queue was a major problem of all the customers. They said that the waiting period was too long, especially in the evenings and weekends. They felt that even thought the service is fast; McDonald’s could do with increasing the number of counters. Wrong order was an issue with the Jain customers who had to change their burgers at least twice to get a Jain burger. The customers below the age group of 25 felt that the outlets played outdated music, which irritates them. But nearly 43% of the customers said that they haven’t had any problems at all in any of their visits. Even if they had some small issues, the employees of McDonald’s solved them very well. Did the French Fries issue make you hesitant from visiting McDonald’s?
64% of the customers said ‘No’ to this question. They felt that a Multi-national company like McDonald’s would never make such a big blunder in a religious country likes India. Unique Selling Proposition of McDonald’s
Food remains to be the favorite part of McDonald’s. Hygiene ranks the next with 24%. This was a popular answer amongst mothers as they found it to be a very hygienic place for their children. The young and energetic ambience of
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McDonald’s is also liked by all. Other USP’s of McDonald’s include good crowd and courteous employees.
Suggestions to improve McDonald’s
22% of the customers were very satisfied with McDonald’s and said that it is fine the way it is. On the other hand, 24% of the customers want the prices to be reduced and also have more variety to choose from. Some of them would even like to have home delivery. Surprisingly, none of the Indian customers suggested starting ‘drive-ins’ which are extremely popular in the other countries.
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? Recommendations based on the survey are: C More items should be added to the product line, especially in the vegetarian category.
C
The prices need to be slashed down. The French fries, chicken burger and the veg burger are the most popular items, so their process can be reduced to attract more customers.
C The advertisements can also focus on the hygiene factor of McDonald’s, for e.g.: McDonald’s can stress on the fact that they do not serve any burger, which has been prepared but not consumed for 10 minutes. C The peak time management should be improved. More counters should be opened during the peak hours. C The music played at the outlet should not be outdated.
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CONCLUSION
To sum up, there is a strong possibility that if the company fails to recognize the new competitions, shifting of consumer interests, and the social trends or innovative technologies, it will loose its market share. Previously, McDonald’s emphasis on adding new restaurants for near 5 years, more than 50% of increase in new restaurants opened. Unfortunately, there was only 2% of increase in the sale of the food. So, in the year 2003 McDonald’s decided to change its focus on increasing sales at existing restaurant and reduced capital spending which allows for a sizeable amount of cash be returned to shareholder. For achieving their objectives, the McDonald’s strategy should be attract more new customers, encourage existing customers to visit McDonald’s more often, build brand loyalty and, ultimately, create enduring profitable growth for the company.
BIBLIOGRAPHY
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? www.google.com
?
www.mcdonalds.com
? www.wikipedia.com ? “McDonalds – Behind the Arches” – John S Love
SAMPLE QUESTIONNAIRE
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Name: _________________________________ Age: __________________________________ Occupation: ____________________________ Contact number: ________________________ Email ID: ______________________________ 1. Do you know that McDonald’s is the largest fast food chain in the world? ? Yes Mind? ? Yes ? Yes ? No ? No ? everyone ? No one ? Alone ? Other ? Once a month ? Very rarely 3. Have you been to McDonald’s before? 4. In your family who likes to go to McDonald's? ? Children ? Parents ? Friends ? Once a week visit increased? ? Yes ? No 8. What do you like the most in McDonald’s? _________________________________________________ 9. How do you rate the service in McDonald’s? ? Very good ? Yes ? Yes ? Good ? No ? No ? Average ? Bad 10. Are you satisfied with the quality of food they provide? 11. Do you think McDonalds provides 100% Hygienic product? 12. Are you aware that McDonald’s undertake social activities for the growth of children and other needful people?
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? No
2. When you hear the word burger does, McDonald’s has come in your
5. With whom do you like to go McDonalds? ? Family 6. How often do you go to McDonald’s? ? More than once a week 7. With the introduction of new Happy Meal price menu has your number of
? Yes McDonald’s? ? Cheap ? Near
? No
13. According to you, how is the relation between the price and the service of ? Reasonable ? Far ? Expensive
14. What is the distance of the nearest McDonald’s from your place? ? Very far 15. What do you suggest what could make McDonald’s better? __________________________________________________
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doc_857353709.docx
helpful project for tybms students............of 200mrks....................
K.J.SOMAIYA.COLLEGE OF ARTS & COMMERCE, VIDYAVIHAR (EAST)
PROJECT REPORT ON
‘MCDONALD’S-BUSINESS STRATEGY’
SUBMITTED BY PRANJAL PANDHARINATH KUBAL
T.Y.B.M.S. [Semester V-VI] ROLL NO-75
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2011-12
DECLARATION
1
I PRANJAL PANDHARINATH KUBAL student of K.J.SOMAIYA COLLEGE of TYBMS (Semester 5-6) hereby declare that I have completed this project on ‘MCDONALD’S–BUSINESS SRTATEGY’ in the Academic Year 2011-12. The Information submitted is true and original to the best of my knowledge.
Signature of Student
CERTIFICATE
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I PRANJAL PANDHARINATH KUBAL student of K.J.SOMAIYA COLLEGE of TYBMS (Semester 5-6) herby certify that I have completed this project on ‘MCDONALD’S-BUSINESS STRATEGY’ in the Academic Year 2011-12. The Information submitted is true and original to the best of my knowledge.
Signature of the Principal of The College/Institution
Signature of BMS Co-ordinator
Signature of Internal Examiner
Signature of External Examiner
ACKNWOLEDGEMENT
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This ‘McDonalds-Business strategy’ is the outcome of sincere and positive contribution. The satisfaction that accompanies that the successful completion of any task would be incomplete without the mention of people whose ceaseless cooperation made it possible, whose constant guidance and encouragement crown all efforts with success. I wish to express my sincere gratitude to our Principal Mrs. Suda Vyas and our BMS Co-ordinator Mr. Sandip Gupta for providing an opportunity to do this project work. I am highly indebted to my project guider Mr. Deelip Palsupare for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project without his support I would have not be able to make it properly Finally, yet importantly, I would like to express my thanks to my beloved parents for their blessings, friends for their help and wishes for the successful completion of this project.
INDEX
SR NO PARTICULARS PAGE NO
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Introduction History of McDonald’s Corporate overview Globalization McDonalds in India SWOT analysis of McDonald’s Strategy of McDonald’s 7 P’s of McDonald’s McDonald’s & Hotel Industry Social Responsibility of McDonald’s Pros & cons of McDonald’s McDonald’s corporation in new millennium Privacy policy regarding children Indian fast food scenario Behind the country SCM at McDonald’s The media magic The marketing strategy of McDonald’s The road ahead McDonald’s Case study Employment opportunities & Benefits Survey of customers Conclusion Bibliography Questionnaire
5 7 9 14 16 19 21 24 26 27 29 30 32 33 35 37 43 46 60 62 69 70 77 78 79
INTRODUCTION
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily. Headquartered in the
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United States, the corporation was founded by businessman Ray Kroc in 1955 after he purchased the rights to a small hamburger chain operated by the eponymous Richard and Maurice McDonald. A McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billions. McDonald’s consumer primarily tastes, the sells hamburgers, cheeseburgers, chicken, French has expanded its menu to fries, breakfast items, soft, shakes and desserts. In response to changing company include salads, wraps and fruit. A key element of McDonald's strategy since the beginning has been the policy of the company to own all property on which a McDonald's outlet was built, regardless of whether that location was franchised or company-owned. Rental income varies from property to property, but it has been estimated that McDonald's generates more money from its rent than from its franchise fees. McDonald’s real estate holdings and rent generated from these holdings are an important component of the company's value and income. McDonald's is unique in the fast-food industry in that it owns much of its real estate. In most cases, McDonald's restaurants are located on prime high-traffic real estate that is highly visible and easily accessible McDonald's conditions for a franchise location include a corner lot with at least 35,000 square feet of land whose entrance and exit were facilitated by a traffic light. McDonald's also earns money by marketing excess land. The company was also testing new methods for raising revenue, such as selling retail merchandise in certain stores. In 2002 Jim Cantaloupe came out of retirement to lead McDonald's turnaround back to profitability and restore the image of one the world's best known brands. The new strategy was called the McDonald's Plan to Win and focused on what the company identified as its five key drivers of success: people, products, place, price, and promotion. The first driver of exceptional customer
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experiences would focus on people, the employees who dealt with the customers on a daily basis. In response to a customer service ranking that rated McDonald's dead last in the fast-food industry, even lower than the IRS. McDonald's vowed to do a better job of staffing its restaurants at busy times and rewarding employees for delivering outstanding customer service. An interactive e-learning program to cost-effectively train employees in customer service attitudes and skills would be instituted by reducing the menu and using more.
HISTORY OF MCDONALD’S
The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 furthered the principles of the modern fastfood restaurant that the White Castle hamburger chain had already put into
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practice more than two decades earlier. The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee". Speeded was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having puffed out costume legs. McDonald's first filed for a U.S. trademark on the name McDonald's on May 4, 1961, with the description "Drive-In Restaurant Services," which continues to be renewed through the end of December 2009. In the same year, on September 13, 1961, the company filed a logo trademark on an overlapping, double arched "M" symbol. The overlapping double arched "M" symbol logo was temporarily disfavored by September 6, 1962, when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years. The famous double arched "M" symbol in use today did not appear until November 18, 1968, when the company filed a U.S. trademark. The first McDonald's restaurants opened in the United States, Canada, Costa Rica, Panama, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden, in order of openings. The present corporation dates its founding to the opening of
a franchised restaurant by Ray Kroc, in Des Plaines, Illinois, on April 15, 1955, the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion, and the company became listed on the public stock markets in 1965. Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The site of the McDonald brothers' original restaurant is now a monument. With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American
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way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility
CORPORATE OVERVIEW
Facts and figures
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McDonald's restaurants are found in 119 countries and territories around the world and serve 58 million customers each day. McDonald's operates over 31,000 restaurants worldwide, employing more than 1.5 million people. The company also operates other restaurant brands, such as Piles Café. Focusing on its core brand, McDonald's began divesting itself of other chains it had acquired during the 1990s. The company owned a majority stake in Chipotle Mexican Grill until October 2006, when McDonald's fully divested from Chipotle through a stock exchange. Until December 2003, it also owned Donatos Pizza. On August 27, 2007, McDonald's sold Boston Market to Sun Capital Partners. Types of restaurants
Most standalone McDonald's restaurants offer both counter service and drivethrough service, with indoor and sometimes outdoor seating. Drive-Thru, AutoMac, Pay and Drive, or "McDrive" as it is known in many countries, often has separate stations for placing, paying for, and picking up orders, though the latter two steps are frequently combined; it was first introduced in Arizona in 1975, following the lead of other fast-food chains. The first such restaurant in Britain opened at Fallow field, Manchester in 1986.
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In some countries, "McDrive" locations near highways offer no counter service or seating. In contrast, locations in high-density city neighborhoods often omit drive-through service. There are also a few locations, located mostly in downtown districts that offer Walk-Thru service in place of Drive-Thru. To accommodate the current trend for high quality coffee and the popularity of coffee shops in general, McDonald's introduced McCafé, a cafe-style accompaniment to McDonald's restaurants in the style of Starbucks. McCafé is a concept created by McDonald's Australia, starting with Melbourne in 1993. Today, most McDonald's in Australia have McCafés located within the existing McDonald's restaurant. In Tasmania, there are McCafés in every store, with the rest of the states quickly following suit. After upgrading to the new McCafé look and feel, some Australian stores have noticed up to a 60% increase in sales. As of the end of 2003 there were over 600 McCafés worldwide. Some locations are connected to gas stations/convenience stores, while others called McExpress have limited seating and/or menu or may be located in a shopping mall. Other McDonald's are located in Wal-Mart stores. McStop is a location targeted at truckers and travelers which may have services found at truck stops. Since 1997, the only Kosher McDonald's in the world that is not in Israel is located in the "Abasto de Buenos Aires", Argentina.
Playgrounds
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Some McDonald's in suburban areas and certain cities feature large indoor or outdoor playgrounds. The first Play Place with the familiar crawl-tube design with ball pits and slides was introduced in 1987 in the USA, with many more being constructed soon after. Some Play Place playgrounds have been renovated into "R Gym" areas. Redesign
In 2006, McDonald's introduced its "Forever Young" brand by redesigning all of their restaurants, the first major redesign since the 1970s. The design includes the traditional McDonald's yellow and red colors, but the red is muted to terra cotta, the yellow was turned golden for a more "sunny" look, and olive and sage green were also added. To warm up their look, the restaurants have less plastic and more brick and wood, with modern hanging lights to produce a softer glow. Contemporary art or framed photographs hang on the walls.
Business model
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McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants. Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly. The remainder is operated by others through a variety of franchise agreements and joint ventures. The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonald's may also collect rent, which may also be calculated on the basis of sales. As a condition of many franchise agreements, which vary by contract, age, country, and location, the Corporation may own or lease the properties on which McDonald's franchises are located. In most, if not all cases, the franchisee does not own the location of its restaurants. The UK business model is different, in that fewer than 30% of restaurants are franchised, with the majority under the ownership of the company. McDonald's trains its franchisees and others at Hamburger in Oak Brook, Illinois. In other countries, McDonald's restaurants are operated by joint ventures of McDonald's Corporation and other, local entities or governments. As a matter of policy, McDonald's does not make direct sales of food or materials to franchisees, instead organizing the supply of food and materials to restaurants through approved third party logistics operators. According to Fast Food Nation by Eric Schlosser (2001), nearly one in eight workers in the U.S. have at some time been employed by McDonald's. (According to news piece on Fox News this figure is one in ten.) The book also states that McDonald's is the largest private operator of playgrounds in the U.S., as well as the single largest purchaser of beef, pork, potatoes, and apples. The selection of meats McDonald's uses varies with the culture of the host country.
Shareholder dividends
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McDonald's has increased shareholder dividends for 25 consecutive years, making it one of the S&P 500 Dividend Aristocrats.
GLOBALISATION
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McDonald's has become emblematic of globalization, sometimes referred as the "McDonaldization" of society. The Economist magazine uses the "Big Mac Index": the comparison of a Big Mac's cost in various world currencies can be used to informally judge these currencies' purchasing power parity. The EFTA countries are leading the Big Mac Index with the top 3 most expensive Big Mac's. Iceland has the most expensive Big Mac, followed by Norway and Switzerland. The brand is known informally as "Mickey D's" (in the US and Canada), "Macky D's" (in the UK), "Mäkkäri" (in Finland), "McDo" (in France, Quebec, the Philippines, and the Kansai region of Japan), "Maccer's" (in Ireland), "Macarrannis" (in Mexico), "Maccas" (in New Zealand and Australia), "McD's" (in New Zealand), "Donken" (in Sweden), "de Mac" (in the Netherlands), or "Mac" (in Brazil). Thomas Friedman once said that no country with a McDonald's had gone to war with another. However, the "Golden Arches Theory of Conflict Prevention" is not strictly true. Careful historians point to the 1989 United States invasion of Panama, NATO's bombing of Serbia in 1999, and the 2006 Lebanon War as exceptions. Some observers have suggested that the company should be given credit for increasing the standard of service in markets that it enters. A group of anthropologists in a study entitled Golden Arches East (Stanford University Press, 1998, edited by James L. Watson) looked at the impact McDonald's had on East Asia, and Hong Kong in particular. When it opened in Hong Kong in 1975, McDonald's was the first restaurant to consistently offer clean restrooms, driving customers to demand the same of other restaurants and institutions. In
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East Asia in particular, McDonald's have become a symbol for the desire to embrace Western cultural norms. McDonald's have recently taken to partnering up with Sinopec, China's second largest oil company, in the People's Republic of China, as it begins to take advantage of China's growing use of personal vehicles by opening numerous drive-thru restaurants.
MCDONALD’S IN INDIA
McDonald's opened its doors in India in October 1996. Ever since then, our family restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana,
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Jaipur, Noida Faridabad, Doraha, Manesar and Gurgaon have proceeded to demonstrate, much to the delight of all our customers, what the McDonald's experience is all about. Our first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A. Almost 50 years down the line, we are the world's largest food service system with more than 30,000 restaurants in 100 countries, serving more than 46 million customers every day. Locally Owned McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations. Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald's in April 1995, they trained extensively, along with their Indian management team, in McDonald's restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India. Respect for local culture McDonald's India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. McDonald's does not offer any beef or pork items in India. Only the freshest chicken, fish and vegetable products find their way into our Indian restaurants. In addition, we've re-formulated some of our products using spices favored by Indians. Among these are McVeggie™ burger, McAloo Tikki™ burger, Veg. Pizza McPuff™ and Chicken McGill™ burger. We've also created eggless sandwich sauces for our vegetarian customers. Even our soft serves and McShakes are egg-less, offering a larger variety to our vegetarian consumers. International Standards
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McDonald's India's local suppliers provide us with the highest quality, freshest ingredients. Complete adherence to the Indian Government regulations on food, health and hygiene is ensured, while maintaining our own recognized international standards. Fast, friendly service - the hallmark of McDonald's restaurants the world over is the mantra we abide by Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are sanitized several times each hour. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant. Philosophy "They take the burger business more seriously than anyone else." When McDonald's founder, Ray Kroc made that memorable statement, he was letting the world in on the philosophy and secret behind McDonald's phenomenal success. Their vision to be India’s "best" quick service restaurant experience is supported by a set of principles and core values.
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The principles that guide us…Quality, Service, Cleanliness & Value - It is an unflinching McDonald's ideology that our customers must always get quality products, served quickly and with a smile, in a clean and pleasant environment; and all at a fair price
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They are committed to exceeding our customers' expectations in every restaurant every time. They have a passion and a responsibility for enhancing and protecting the McDonald's brand. They believe in a collaborative management approach, employing a mutually respectful business philosophy They will seize every opportunity to innovate and lead the industry on behalf of our customers.
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It was early evening and one of the 25 McDonald's outlets in India was bustling with activity with hungry souls trooping in all the time. No matter what one
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ordered - a hot Maharaja Mac or an apple pie - the very best was served every time. But did anyone ever wonder as to how this US giant managed the show so perfectly? The answer seemed to lie in a brilliantly articulated food chain, which extended from these outlets right up to farms all across India. US-based fast food giant, McDonald's success in India had been built on four pillars: limited menu, fresh food, fast service and affordable price. Intense competition and demands for a wider menu drive-through and sit-down meals encouraged the fast food giant to customize product variety without hampering the efficacy of its supply chain. Around the world (including India), approximately 85% of McDonald's restaurants were owned and operated by independent franchisees. Yet, McDonald's was able to run the show seamlessly by outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain. Between 1992 and 1996, when McDonald's opened its first outlet in India, it worked frenetically to put the perfect supply chain in place. It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect cold chain1 in place. And explained to the suppliers precisely why only one particular size of peas was acceptable (if they were too large, they would pop out of the patty and get burnt).These efforts paid off in the form of joint ventures between McDonald's India (a 100% wholly-owned subsidiary of McDonald's.
SWOT ANALYSIS OF MCDONALD’S
Strengths ? McDonalds has successfully rolled out new items like coffees, smoothies, and Angus burgers, expanding the range of menu choices. ? With a strong product offering, the company has grown income throughout the recession, nothing strong increases in same store sales.
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? Operations are spread around the world, meaning the company is not exposed to just once currency or economy.
? Even trading near its highs, McDonald’s serves up sizzling dividend
yields that top !0 treasury. The yield comes with a side order of annual dividend hikes dating back to 1976.The annual dividend payment has gone from 55cents per share in 2005 to$2.20 this year. Weakness
? It will be harder ant harder to find prime locations to build a set of golden
arches. The U.S is saturated with its restaurant. So growth will have to occur internationally. Posing potential cultural challenges.
? While the annual dividend hikes are likely to continue, the dividend
growth rate has been slowing and will probably continue to slow or level off. Opportunities
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Customer Demand- The needs for the good quality control of fast food and hygienic environment.
? Compliance supply chain -Ensure the quality and cost control with economies of scale from large ordering.
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New launch of food product -Promoting new healthy menu and creating needs to customers. Annual market growth rate-Focus the market segment of young and energetic people and right positioning in high quality products
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Social/ political/ legal impact-Enhancing the advance technology on the cosmetic products with no harm to the environment and natural to skin. Threats
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Competitive intensity -Very strong competition in catering market. Technological requirement- Need innovation and investment in developing high technology in farming to improve the quality of meat provided.
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Overall market size-The overall market size is becoming saturated.
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STRATEGY OF MCDONALD’S
McDonald’s Corporation, the world’s largest and best-known global foodservice retailer, has demonstrated positive momentum with a growth potential of opening 2,000 restaurants per year worldwide. Total stores in 1998 exceeded 23,000, with over 12,000 in the United States and 11,000 in company's strategic priority providing exceptional customer care, remaining an efficient and quality producer, offering high value, and effectively marketing McDonald's brand on a global scale. The future success of McDonald's is based on strategically managing its strengths and competitive advantages today to develop
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increasingly profitable positions in its global markets tomorrow. McDonald's strategy has the following core elements. Growth Strategy ? Add 2000 restaurants annually, some company owned and some franchised, with about two-thirds outside the United States. ? Promote more frequent customers via the addition of breakfast and dinner menu low price specials, and Extra Value Meals. ? Dominate the global food-service industry. Global dominance means setting the performance standard for customer satisfaction while increasing market share and profitability through the firm's convenience, value, and execution strategies. ? Improve an already strong position. The firm's strategies are simple and emphasize making customers happy with everyday low prices and outstanding restaurant operations so they visit more frequently. Further strategies are to increase market share by attracting more customers more often to increase profitability by being more efficient, and to create economies of scale.
Store Location (Distribution) ? Locate restaurants only on sites that offer convenience to customers and afford long-term sales growth potential. (The company utilized sophisticated site selection techniques to obtain premier locations. In the United States, the company supplemented its traditional suburban and urban locations with outlets in food courts, major airports, hospitals, and universities; outside the United States the strategy was to establish an initial presence in the central cities, then opening freestanding units with drive-thrus outside center cities).
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? Utilize store and site designs that are attractive and pleasing inside and out, and, where feasible, provide drive-thru service and play areas for children. Product Line Strategy ? Offer a limited menu. ? Expand product offerings into new categories of fast food (chicken, Mexican, pizza, and so on), and include more items for health conscious customers. McDonald's has been giving franchisees more leeway in trying out new ideas and new menu items apart from the core hamburgerand-fries selection. Pizza puffs and breakfast bagels are on the menu in certain locations and sandwiches are being sold at sharp discounts on selected days or times. In York City, a vegetarian sandwich is on at least one store's menu. ? Do extensive testing to ensure consistent high quality and ample customer appeal before rolling out new menu items system wide. The firm's "Made for You" just-in-time ordering system is available in nearly 10 percent of its outlets, promoting the theme and benefits of serving hotter food and producing cost savings from reduced waste. The combination of advanced equipment, sophisticated computer technology and new operation procedures will enable delivery of food "Made for You" at the speed of McDonald's. Store Operations ? Establish stringent product standards, strictly enforce restaurant operating procedures (especially concerning food preparation, store cleanliness and friendly courteous counter service), and build close working relationships with suppliers to assure that food is safe and of the highest quality. ? McDonald's' first priority is to improve restaurant operations. Strategic initiatives encompass realigning its structure and reducing its operations as a reaction to economic turmoil in certain international regions. Furthermore, the next generation of quality food preparation is being introduced to support its industry leadership into the next century.
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Relationships with its global network of suppliers add a dimension to its leadership position. Sales Promotion, Marketing, and Merchandising ? Enhance the McDonald's image of quality, service, cleanliness, and value globally via heavy media advertising and in-store merchandise promotions funded with fees tied to a percent of sales revenues at each restaurant. ? Continue to use value pricing and Extra Value Meals to build customer traffic. ? Use Ronald McDonald to create greater brand awareness among children, and the "Mc" prefix to reinforce the connection of menu items and McDonald's.
7 P'S OF MCDONALD’S
PRODUCT McDonald’s product portfolio primarily comprises of vegetarian and nonvegetarian burgers. The vegetarian burgers like Veg surprise, salad sandwich, Mc Aloo Tikki Burger, Mc veggie burger are offered to the customers. Nonvegetatarian burgers include Chicken Mc grill, Mc chicken burger, Fliet of fish and chicken maharaja burger. Along with these french-fries, veg pizza mc puff, wrap chicken Mexican, wrap paneer salsa, potato wedges, soft serve pineapple and chocolate ice creams, Mc swirl soft drinks, coffee and Mc shakes are also offered to increase the variety in the product portfolio. Mc Donald’s also provides mean combos with medium fries and medium soft drink, happy mean
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with small soft drink, econo meals with small soft drink and value meals with potato wedges and small soft drink PRICE McDonald’s vegetarian burgers are priced between Rs 20 and Rs 48. Wrap paneer salsa is priced at Rs 45-50. The non vegetarian burgers are priced between Rs 30 and Rs 60. Wrap chicken Mexican is priced at Rs 55. Medium French fries are priced at Rs 28, potato wedges at Rs 20, soft serves at Rs 35, mc swirl at Rs 12, medium soft drinks at Rs 20 and medium shakes a Rs 45. PROMOTION At McDonalds the prime focus is on targeting children. In happy meals too which are targeted at children small toys are given along with the meal. Apart from this, various schemes for winning prices by way of lucky draws and also scratch cards are given when an order is placed on the various mean combos. In fact, the various econo meals and value meals also signal to the customer that buying separate items results in greater value for money for the customer. PLACE McDonald’s outlets are very evenly spread throughout the NCR region. McDonalds does not offer home delivery but its outlets are very readily accessible. McDonalds also offers take away drive through facilities. PEOPLE The employees in McDonalds have a standard uniform and McDonalds specially focuses on friendly and prompt service to its customers from their employees. PROCESS The food manufacturing process at McDonalds is completely transparent i.e. the whole process is visible to the customers. In fact, the fast food joint allows its customers to view and judge the hygienic standards at McDonalds by allowing them to enter the area where the process takes place. The customers are invited to check the ingredients used in food. PHYSICAL EVIDENCE McDonalds focuses on clean and hygienic interiors of is outlets and at the same
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time the interiors are attractive and the fast food joint maintains a proper decorum at its joints.
MCDONALD’S AND HOTEL INDUSTRY
McDonald’s is one of the world’s strongest and most recognizable brands for its “world’s best quick service restaurant service experience” (Vandenbosch and Mark). This case study states that McDonalds plans to extend its brand into the hotel industry by opening a hotel in Illinois. The authors look at the hotel venture’s positioning options and the McDonald’s brand extension into a different product class. In order for McDonalds to successfully extend their brand into the hotel industry, they must manage their growth wisely, rely on the strength of their corporate brand, and consider what their customers really think their brand is. In the end, they must make sure that the extension of their brand brings meaningful perceived value to the consumers they target. Over the last decade, brand extension has become one of the hottest subjects in brand management. Extending a brand into a new category to capitalize on
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brand recognition and consumers’ trust can be a good choice for a few reasons. It can help lower costs, and add profits relatively fast while limiting financial risks because several products will promote each other under the same brand name. In many industries, launching a new brand is costly and so it seems logical that any company with such a huge brand name in the marketplace would decide to extend their brand in an economical way to quickly gain credibility in the new chosen marketplace. For the same reasons, it takes less time to educate the market with the extended services of an existing brand than to launch a new name from scratch. short period of time. McDonald’s is the leading global Fast Food service retailer with more than 30,000 restaurants serving millions of people in more than 100 countries. Very naturally, McDonald’s is the world's most famous, well-known, recognized brand in fast food restaurant category. From a managerial perspective, brand extension is a relatively fast way to add more to the bottom line in a relatively
SOCIAL RESPONSIBILITY OF MCDONALD’S
Founded in 1954 McDonald, now a multi billion dollar company is not only recognized for being fast, affordable and delicious but also for its contributions to the community. Their biggest proceeds go towards The Ronald McDonald House Charity. RMHC is a non-profit organization completely owned by McDonald Corporation. The purpose of the organization is to help families in financial need. RMHC provides room for the families of hospitalized children. So they are able to stay close to their children during their hospital stay. Without the help provided by RMHC, these families oftentimes could not afford to provide the support needed, to their kids. McDonald support programs that benefit children and families, through fund raising and charities for instance World Children's Day at McDonald. This fundraiser benefits RMHC chapters and other programs for children. They also contribute to women health care; all proceeds during Mothers Day go towards
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sponsoring the Women Owners Network (WON), which supports breast cancer work in the West. Another program sponsored by McDonald is The Make Activities Count (MAC), which provides grants to school teachers to support hands on programs that enhance student learning experience. Being apart of so many charities and programs help project a positive image on to the community, which enhances McDonald public image. Take a look at why a business like McDonald might get behind such a cause. Clearly, because helping children is an honorable and worthy cause. Nevertheless, it also provides good publicity for McDonald. Due to the fact that this publicity is worth millions to McDonald and it is money that will go directly into the pockets of McDonald shareholders. The millions spent are the result of the support of RMHC.
MCDONALD’S CORPORATE IDENTITY
Corporate identity is the most significant element to create and strengthen a company's industrial presence among the competitors. Corporate identity helps a company to establish a name in the consumer's mind and communicate its image to the target group from the shortest way. While exposing the positive sides among the competitors, it presents the first sights about the qualifications like quality, trust & stability If an organization is ruled by the principles rather than the managers or in other words if the principles remain unchanged although the managers are replaced and if that particular organization has qualifications and standards which separates it from the others than we can conclude that organization is a corporation. Corporations do not really need very strong managers. A manager's success in a corporation is measured by his ability to apply and adapt the existing principles. Main idea behind a corporate identity program is to explain the organization itself and its purpose explicitly in all the business done. Recent surveys indicated that average human brain is only capable of dealing with seven different units at most at the same time and
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also ranking them according to the priorities. Companies are bombarding the consumers with advertisements in the daily life. For instance one thousand and two hundreds of advertisements are aired per day on a channel in Germany. Products with no name and no specific producer have almost no chance in an environment like this. Although consumers say that they are not affected but the advertisements, they still prefer the brands they heard before or seen somewhere. They prefer the brands they recognize. How do the consumers recognize the brands? They are always facing the products but they do not have enough information about the producers. Because normally consumers do not have the opportunity to look around the production facilities, walk into the offices and get to know with the managers.
PROS AND CONS OF MCDONALD’S
Now a day every body will recognize the golden arches of McDonalds, it is hard not to. McDonalds has restaurants everywhere, beside major roads and in almost every high street. Their commercials are on television at least once a day. They became popular within a couple of years. Teenagers especially like McDonalds because of the relaxed atmosphere, cheap prizes and the fact that all over the world you know what you are buying. In restaurants I find that the waiters look at me and think that I might not be able to pay for the meal. With McDonalds I find that every person is welcome to come in and eat, no matter what you look like or how much money you have. There is also not a certain dress code that you have to oblige to. Fast food is easy to eat food that requires no cutlery. The fast food industry is not only good. The foods contain too much fat, salt and sugars. The food is not always what is said to be and uses a lot of packaging. Packaging that will be thrown on the ground, if the food is not eaten within the restaurant. People usually don't take the time to throw the packaging in the dustbins. The high streets usually have a whole carpet with litter of fast
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food restaurants. I think that the restaurants can't be responsible for the litter but the restaurants can do every thing to make their packaging as environmental friendly. People that eat at McDonalds do not always realize what happened to the cow before it turned into the hamburger. Mostly the animals are living in bad conditions. Chickens get born with foot disorders. But then again I guess that the animals the produce the meat for the top class restaurants suffer the same. The fast food industry advertises with the target of children. With there freebies and bright adverts the get children to make their parents take them to McDonalds.
MCDONALD’S CORPORATION IN THE NEW MILLENIUM
McDonalds Corporation in the new millenniummericanism meaning that they have now become the target of terrorist group and attack. Economic Challenges Economic Challenges McDonald’s must consider economic challenges when expanding internationally. Low set up costs rapid expansion one of the challenges for fast food industry is that to keep the price is low for the customer. Franchising facilitates set ups McDonald’s corporation provides financing assistance and training for new franchise owners to manage cash flow and keep businesses profitable. Social Challenges The main reason is the consumer’s worries had greatly increased with health fears so customers now opted for healthier options like subway which offered more of a variety for health conscious customers. Social Considerations Social Considerations To ease customers concern about health issues, McDonald’s has made changes to the following; McDonalds changed its image
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vastly by evaluating the current menu and making changes to it from using organic products to revising the whole menu entirely by offering salads and vegetarian burgers. McDonald’s serves a range of high-quality foods that can fit into a balanced diet. The accurate and accessible nutrition information help guests make informed menu choices. Social Considerations Emphasis on food safety: McDonald’s suppliers have food safety management systems in place, including Good Manufacturing Practices (GMP), a verified Hazard Analysis Critical Control Point (HACCP) plan and crisis management, food security and other applicable programs
Technological Advantages Technological Advantages McDonald’s has taken advantage of technology to streamline their processes and improve efficiency. Through technology enhancements such as FPI's Help Desk Service, network and application consolidation, and other technology implementations, operations of the company are greatly improved
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PRIVACY POLICY REGARDING CHILDREN
McDonald's is very sensitive to privacy issues. They are proud of our longtime commitment to their Customers. They are especially careful in any communications with one of their most treasured Customers - children. On our web sites, they offer many features, like games and coloring books, which do not require a child to provide any personal information. They collect only limited personal information from children 12 and under (like their email addresses) to respond to their online requests. For example, we may collect a Child’s email address in order to send the child a screen saver, but we promptly delete the email Address from their system. Or, they may collect a child's email address in order to enter the child in a Sweepstakes. They may also ask a child to provide an email address of a parent so we can notify the Parent or seek consent. We will not collect more detailed information from a child 12 and younger, Such as a postal address or a telephone number, without the consent of a parent or guardian. McDonald's will not condition a child's participation in any online activity on the child's disclosure of more personal information than is reasonably necessary to participate in that activity. Personal information collected from children is used solely by McDonald's or other entities that provide technical, fulfillment or other services to McDonald's. For example, such entities may provide
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services, such as, improving our web sites, fulfilling requests or administering sweepstakes. This personal information is not sold or transferred to third parties. They urge parents to regularly monitor and supervise their children's on-line activities.
INDIAN FAST FOOD SCENARIO
There are approximately 22,000 registered restaurants in India, which have sales of over $15,000 per month. In addition, there are more than 100,000 roadside restaurants (dhabas) selling their prepared foods in small stalls in cities and on highways. There are 1,568 registered hotels in India. The opportunity for U.S. food companies in India’s food service market is small but growing. Sales by Indian food service companies totaled approximately $6 billion in fiscal year 1998. Restaurants account for approximately 55 percent of Indian food service sales. The institutional sector consists of hospitals, prisons, defense establishments, schools, company canteens, railways and airlines. Indian Food Service Sub-Sector Sales FY 1998 100 percent = $6 billion
Excludes roadside restaurants
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Source: Literature search, Interviews, PSi analysis
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Factors driving increased food service sales
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Growth in Personal Income: The increase in buying power of Indian consumers is driving growth in the food service sector. India's per capita income has increased by over 20 percent from 1992 to 1996.
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Shrinking Household Size: The total number of households in India has increased by less than 3 percent per year from 1990 to 1998; however, the number of households in middle, upper and high-income categories has grown by more than 12 percent annually. These households have higher disposable income per member and have a greater propensity to spend on food.
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Urbanization: Approximately 50 percent of high, upper and middleincome group Indian consumer households reside in urban areas. Growing Number of Women in the Workforce: Over 16 percent of the population of Indian women work full-time and spend most of their time away from home. Due to these changes many Indian consumers are opting for meals away from home.
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Menu Diversification: High-income Indian consumers are seeking variety in their choice of food. Urban Indian consumers are aware of various international cuisine (e.g. Continental, Chinese, Mexican, Italian, Thai, and Japanese) and an increasing number are willing to try new foods
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A growing number of specialty restaurants, fast food outlets, and home delivery and take- away restaurants have opened in the last few years. A number of foreign restaurant chains (e.g. Domino's, Pizza Hut, Pizza Express, McDonalds, TGIF, KFC and Baskin Robbins) have started operations in India and have achieved success.
BEHIND THE COUNTRY
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Kroc’s Principles McDonald’s success is the result of its dedication to operating regimen. More than any other early competitor in fast food, McDonald’s was deadly serious as it went about the task of defining its operations, setting basic standards of achievement, and monitoring suppliers and operators to determine whether standards are being met. Kroc’s personal commitment to quality, service and cleanliness is legend. QSC long ago became the most popular acronym among fast-food operators, but the phrase originated with Kroc, and he used QSC to distinguish McDonald’s from all other competitors in an industry that was otherwise rife with duplication. QSC has now been changes to QSC & V, where V stands for Value for Money. In setting up its operating system, McDonald’s displayed no particular genius, just tenacity. To survive today, all fast-food chains must build central organizations to develop standards of operation and train the licensees to meet them. They must be responsible for picking suppliers and setting specifications on all food products. And finally, they must monitor the system to determine that the franchisees are following standards and that the suppliers are meeting product specifications. As logical and basic as that sounds, it was a revolutionary concept in food franchising when McDonald’s took that approach in the 1950s. In fact, McDonald’s greatest impact on American business is in the areas that consumers do not see. In their search for improvements, McDonald’s operations specialists moved back down the food and equipment supply chain. They changed the way farmers grow potatoes and the way companies process them. They altered the way ranchers raised beef and the way the meat industry makes the final product. They invented the most efficient cooking equipment and pioneered new methods of food packaging and distribution. The McDonald’s in India is following the same tradition. Long before the first Maharaja Mac was served up, McDonald’s was here in India, setting up the elaborate cold chain those supplies all the restaurants in the country. It took six years from 1991 when the work started, until the system was in place. “We
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spent Rs.50 crore – even before the first restaurant was set up in 1996,” Amit Jatia confesses.
SUPPY CHAIN MANAGEMENT AT MCDONALD’S
Did you know that every year, Rs. 50,000crores worth of food produce is wasted in India? This is mainly because of the lack of proper infrastructure for
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storage and transportation under controlled conditions. McDonald's is committed to providing quality products while supporting other Indian businesses. And so, we spent a few years setting up a unique Supply Chain, even before we opened our first restaurant in India. A Supply Chain is a network of facilities including - material flow from suppliers and their "upstream" suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their "downstream" customers at all levels. So, raw material flows as follows: supplier - manufacturer – distributor – retailer – consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about. When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect. Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond one’s immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized. For example, a diesel engine manufacturer may be able to integrate a GPS locator system into its engine control system. Its immediate customer, a heavy truck manufacturer, may see no need for this functionality. However, the downstream customer, a trucking company with a large fleet, may be very interested in a locator system. Understanding the value to the downstream customer is part of the supply chain management process. THE SUPPLY CHAIN OBJECTIVES The supply chain objectives are assured supply, low cost and safe and consistent quality. During 1990, when they first set out to outline their infrastructure, they found that the cold chain system was non-existent. There
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were only 200 refrigerated trucks across the country and very few cold storages. The cold storages were primarily used by the ice-cream sector and they were of very poor quality. The cold chain system set up involved the transfer of technology from McDonald’s in the US and its international partners. The standards also strictly adhere to Indian Government regulations on food, health and hygiene. Currently, McDonald’s distribution centers (DCs) are in touch with all the suppliers through electronic interconnectivity (e-mail). The supply chain converts the 15-day lead-time from the suppliers to a one-day ordering lead-time for the restaurant. The products are picked up in temperature- controlled vehicles by a third-party logistics company and delivered at the DCs. The DCs then supply to restaurants on a need-basis. All products go through the quality control checks before reaching the customer. According to Hard castle Restaurants national supply chain product manager Mr. S D Saravanan: “Traditionally, any supply chain functions through suppliers, stockiest, distributors, primary wholesalers, secondary wholesalers and retailers. However, at McDonald’s India, the supply chain involves only producers, distributors and retailers.”
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McDonald’s post-harvest facilities include a cold chain consisting of a vacuum pre-cooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of this crop is maintained between 1 degree Celsius and 4 degree Celsius and 95 per cent, respectively. Vegetables are stocked in the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid cooling to two degrees Celsius within 90 minutes. The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage. Thus, zero percent spoilage and freshness are being maintained. McDonald’s India sources food products through 45 different suppliers and 10 key local companies. The key local suppliers include: Vista Processed Foods (VPF), Trikaya Agriculture, Dynamic Dairy Industries, Radhakrishna Foodland, Cremica, Shah Bector and Sons, Global Green Company and Bector Foods. Another striking factor of McDonald’s is that it never has any written contracts with the suppliers. The relationship is only based on trust. The McDonald’s team help the suppliers develop, and hence they are assured that McDonald’s will stick to them through thick and thin.
Mechanism of each supplier
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Trikaya Agriculture, which is an intrinsic part of the cold chain and supplies fresh lettuce to McDonald’s at the rate of 300 metric tones per annum. The farm has the total capacity to produce 1,000 metric tones, per annum. According to Trikaya Agriculture Pvt Ltd farm manager Mr. M E Gowda: “Initially, lettuce could only be grown during the winters. With McDonald’s partnership, Trikaya is now able to grow the crop all round the year.” India, now supplies lettuce to five star hotels, flight kitchens, clubs and offshore catering companies. And it will soon be
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exporting to international markets, especially to McDonald’s Asia Pacific and Middle East operations.
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Vista Processed Foods (VPF) based in Taloja, Maharashtra, with technical and financial support extended by OSI Industries Inc, US, and McDonald’s Corporation Inc, US — operates infrastructure and support services. It supplies vegetable patties, chicken patties, pies and pizza puff at the rate of 30 metric tones per month to McDonald’s India.
? McDonald’s vegetable and chicken patties are processed through the latest food processing technological plant at Vista. Vista has installed hitech equipment for the purpose of deboning, blending, coating, passing the patties through the stern breading machine, frying and freezing.
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Vista’s pie line has the sophisticated, computerized Rondosheeter (the machine where processing takes place) in operation, which includes hi-tech refrigeration plants for the manufacture of frozen foods at temperature as low as minus 35 degrees.
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Dynamic Dairies: In some cases, the Indian suppliers had the technology but no market for the products they produced. For example, Dynamic Dairies through its relationship with McDonald's was introduced to a large consumer to supply milk casein and other milk derivatives. The two companies entered into a business relationship resulting in an initial export order of approximately US $12 million per year – with the potential to increase.
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After the food products are processed at their respective companies, they are received and stocked at the McDonald’s distribution partner — the Rs 80-crore Radhakrishna Foodland Ltd — to ensure that all McDonald’s restaurants are supplied without interruption.
The company however failed with potato farming, despite spending $10 million in Uttar Pradesh. But it claims that by 2004, McDonald’s will source potatoes from India for French fries. “With all 80 restaurants in place, we expect our consumption of French fries to be 10,000 metric tones and then it makes economics sense to grow processed grade potatoes in India,” says Jatia.
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However, the newly introduced potato wedges are being made from potatoes grown in Gujarat. HACCP’s There is a concept known as the HACCP’s followed in McDonald’s. HACCP’s stands for ‘Hazard Analysis and Critical Control Points’. There are some key areas identified by McDonald’s for e.g. the patties for the burgers have to be stored at a certain level of temperature. A list of these HACCP’s is given to all the suppliers and they have to strictly adhere to them. Surprise checks are made by the McDonald’s employees to check if all the quality standards are being followed.
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THE MEDIA MAGIC
“You deserve a break today, so get up and get away – to McDonald’s.” The above ‘break’ commercial was one of the initial commercial themes adopted by McDonald’s USA which became the best known commercial song on television and, in fact, the most identifiable advertising themes of all time. Needham was one of the first advertising agencies of McDonald’s, which made many revolutionary advertisements for the company. Needham’s advertising formula became known in McDonald’s as “food, folks, and fun,” and it remains the backbone of al the chain’s advertising campaigns. McDonald’s is now, one of the world’s mightiest consumer marketers. Its brand valuation is $25 billion, making it the ninth most valuable brand in the world. McDonald’s Marketing Strategy Worldwide The first step in developing a marketing strategy is to understand the customers, enabling reaction to their changing needs and the changing dynamics of the market. To this end McDonald’s conduct several stages of in-depth customer research and audits of the McDonald's brand. The research involving both quantitative and qualitative research methods. This research tells them a lot about how McDonald's is perceived and about trends that are taking place in the market. They also conduct research into the local area of their restaurants, into the general market environment, and into specific areas of their business, children for example. McDonald’s also had to have a thorough understanding of their competition. They consider 3 basic areas:
1. The Total Eating Out Market gives the broadest competitive context
and includes all restaurants, hotels, pubs, and any other outlet where people eat
2. They also focus on the Quick Service Restaurant sector. This includes
all the obvious competition and also fish and chip shops, and sandwich shops - any outlet where food is served quickly.
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3. The final sector that they focus on is defined as the Burger House
Sector. This looks only at restaurants serving hamburgers including Burger King, Wimpy, Wendy's and all independent burger bars. A useful way to gaining knowledge of all aspects of the competition is the examination of the four Ps of the marketing mix: Price, Promotion, Place, and Product.
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Competitive Promotion: Before they communicate with their customers they must be aware of what the competitors are communicating so that they can create a beneficial difference between McDonald’s and them.
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Competitive Pricing: Being in touch with the pricing of their competitors allows them to price their products correctly, balancing quality with value.
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Competitive Product: Quick Service Restaurants are constantly expanding their menus. This can be done on a short-term promotional basis or as a long-term expansion strategy.
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Competitive Place: Distribution is a key to any retailer or brand. Why Mudra in India?
DDB Needham and Leo Burnett are the advertising agencies of McDonald’s worldwide. Hence, when they came to India, the subsidiaries of both the companies pitched for the account and ‘Mudra’, the Indian partner of DDB Needham got the account. Since the very beginning Mudra has been the advertising agency of McDonald’s India. The Mudra team meets up with McDonald’s marketing team on a regular basis and they have a debate and discussion on the new strategies to be adopted. McDonald’s uses various Medias like television, hoardings and bus shelters. They are almost out of print ads. McDonald’s also sponsor many television programmes like Kaun Banega Crorepati, Children shows etc. Even the paper mats on the trays at the McDonald’s are designed as per the ongoing marketing strategy of McDonald’s. For e.g.: During the French fries
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issue, all their paper mats had description of the burgers, how the vegetarian products are made etc, to regain the confidence of the customers. The placing of the pamphlets, banners in and around the outlet is decided upon by the Area Sales Manager and the Operations Manager, in co-ordination with the Restaurant Manager. For e.g.: Currently they have the Bugs Life Theme going on wherein they give free Bugs Life toys with the Happy Meal. All the outlets are decorated with the pictures of the toys and even the paper mats have pictures of the toys on them. The hoardings around the outlets carry the same theme. The 80-20 Menu Boards Even the menu counters in the outlet are a marketing tool for the company. They have to be designed such that they catch the attention of the customer and tempt him to order the product. So McDonald’s have menu boards that are descriptive as well as visual. They call it the 80-20-menu board-eighty percent visual and twenty percent descriptive. The aim is to make things easier for the customer to understand what the 39, 49, 59, 79, 89 rupee options are. And of course it is easier for McDonald’s also to give back the one rupee change so that the service can be quick.
80-20 Menu Boards
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MARKETING STRATEGY OF MCDONALD’S
The marketing strategy of McDonald’s in India has gone through manly 3 stages: Stage I: Building the Brand Stage II: Awareness of the products Stage III: Gunning for market share. Stage I: Building the Brand The Stage Fright Advertisement (We make you smile!) The initial marketing strategy was focused on building the brand name in India. McDonald’s wanted to bring an awareness of its presence, of the arrival of McDonald’s in India. Hence, even thought it had presence only in 2 cities, Delhi and Mumbai, it still went in for Nationwide Advertising. The first advertisement of McDonald’s in India was of a child getting tensed in a Fancy dress competition and forgetting his lines. His father then takes him to McDonald’s where he forgets all his fears and gives a brilliant performance appreciated by all in the restaurant. Every child in India could relate itself to the child in the advertisement and it gave the parents the idea that if their child were unhappy, taking him to McDonald’s would definitely bring a smile to his face. When Vikram Bakshi was asked how the idea for the first advertisement came up, his reply was:“The idea came from the experiences of what we saw happening at the restaurants. I think one of the things that recent research has shown is that 69 percent of the kids prefer us. That kind of response is overwhelming! We have seen over a period of time that some of the things we set out to do in 1997-98 are paying off now. Really the kids are very happy to be here. They find it a hassle free experience. Nobody to say, "Sit down!" or "Don't move!" He is no longer told that if he runs around he will bang into someone and spill things over. He doesn't encounter adults all the time like he does in specialty restaurants-waiters who are in their thirties and forties, with faces which say, "Keep out of my way!" What he sees when he comes into McDonalds is a place that is brightly lit-there are no dark corners that he needs to be scared of. The people working here are all young. He can walk up alone to
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the counter and ask for whatever he wants, someone will talk to him, take him seriously, look after him, ask him questions. He has a play area where he can run around. And clearly even parents are happy to bring their children here. I have seen many instances where parents come in with their children; they are playing while the parents are also enjoying themselves. There was this lady I met and she asked me, "What is this that you do to children?" So I said, "What do we do meaning?" She said, "My two year-old recognizes McDonalds. When I took her to Wimpey’s the other day she refused to enter the place, saying it was not McDonalds." Stage II: Awareness of the Products McDonald’s then felt that it needed to highlight its products along with the experience. Hence, the series of advertisements highlighting on the products and new launches of McDonald’s. McDonald’s wanted the customers to know that they have something for everybody, be it children or adults, vegetarian or non-vegetarian. The advertisements in these series were:
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The Sleeping Couple: In the sleeping couple advertisement the husband is shown dreaming about the various products of McDonald’s. Anyone watching the advertisements felt like going to McDonald’s right away.
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The Police and Thief: The thief is on a run from the police but makes a stop at McDonald’s to have the new McPizza Puff and the Chicken McGrill.
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The Barber and the Customer: The customer is getting himself shaved when he hears about the launch of McPizza Puff and Chicken McGrill, and runs to the nearest McDonald’s half shaved.
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The Runaway Bridegroom: A couple is getting married when the Bridegroom runs away in the middle of the marriage to have the new McPizza Puff and the Chicken McGrill and the whole family follows him.
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Veg Surprise: The latest commercials, around 3 of them, are focused on the launch of the new Veg Surprise for Rs.17 only with the punch line “Yakein hi nahin hota”.
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Stage III: Gunning for market share The latest advertisements of McDonald’s are a transition from the first strategy. In the initial advertisements, McDonald’s was attempting to build a relationship with the customers. But now, the advertisements portray that the relationship has already been established. It’s got the mind share, and its now gunning for market share. The ad campaigns are trying to portray McDonald’s as a constant companion, which makes people feel special. The recent commercial highlights the bond that McDonald’s shares with people. It shows a child moving to a new locality, and he is sad. But when he sees McDonald’s in his neighborhood, the child is once again reassured. The recent ad campaign is targeting the Indian is targeting the Indian father, as he is still looked upon as a decision-maker. The new positioning: McDonald’s is a special place where caring dads take their families to give them a great time. So it’s a clear positioning as a family restaurant. “We are positioning ourselves as the welcoming and affordable family restaurant committed to values of quality, fun and excitement. It is also a restaurant which makes you feel special and makes you smile”, says Amit Jatia. Miscellaneous Advertisements There were many other advertisements made by McDonald’s emphasizing on the schemes, the prices and various other aspects. Some of them were:
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The ‘Itch Karo’ Scheme: This advertisement was to promote the scheme of McDonald’s wherein you could win prizes right from a small Cadbury to a television and bike.
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Soft Serve Cone: There were many advertisements focusing on the Rs.7 soft serve cone. One of them was of a traffic policeman who gets tired of directing the customers to the McDonald’s outlet. This advertisement if of the most liked and remembered advertisements of McDonald’s.
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Happy Meal: There are various advertisements relayed during children programmes on television and also children channels emphasizing on the happy meals and the toys you get with them. The French Fries Issue
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On May 4th 2001, the outcry over the alleged use of beef flavoring in the preparation of French fries by McDonald’s led to attacks on two outlets in Mumbai and Thane. Within hours of the story breaking that McDonald’s in the U.S. had been using oil with a beef extract for cooking its fries, the burger giant’s Indian operation knew it had a crisis on its hands. Amit Jatia and his staff huddled together with PR specialists from Corporate Voice Shan wick, ad men from Mudra DDB, corporate affairs and legal experts. Police security for all outlets was first red alerted. Then, posters were made from office printers with the headline: “100 percent Vegetarian French Fries in McDonald’s India.” Below this were various bullets of information such as: “No flavors with animal products/extracts are used for preparing any vegetarian products in India.” The posters were plastered over all the Big M outlets. The main imperative was to supply proof. On the day the story broke in India, McDonald’s submitted samples of the fries to leading laboratories in Pune and Mumbai, such as the Council of Fair Business Practices, as well as Delhi’s Central Food and Technical Research Institute. Tests were quickly done by the BMC (Bombay Municipal Corporation) and FDA and local political parties. It took a week but the results were clear – no beef or meat in the oil or products – which were rapidly passed to the press. The results were also posted in the various outlets and put as inserts in the daily papers in sensitive areas like Bombay’s Vile Parle, Charni Road and Thane district. All these marketing efforts helped the Big Mac to avert the crisis and regain the confidence of the customers. For a few days after the news, the sales dropped drastically, but now, the outlets are back to their usual footfalls and french fries remain the most favorite and most selling product of McDonald’s India. Where’s Ronald McDonald?? In countries like Australia and U.K, where McDonald’s has its presence since decades, many of the marketing strategies have been focused on Ronald
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McDonald and his friends like Ham burglar, Grimace etc. Ronald McDonald is a prominent figure in the children’s life of those countries. The very first Ronald McDonald was the famed weatherman Willard Scott. In the very first Ronald McDonald commercial, with Willard Scott as Ronald (c.1960), he actually says something to the effect of "I know you're not supposed to talk to strangers, kids, but its okay to talk to me, because I'm Ronald the hamburger-loving clown!" Originally he wore shoes made of buns, a cup on his nose, and a hat with a hamburger meal on it. Soon, this was dropped for the more familiar clown outfit. But in India, none of the advertisements currently focus on Ronald McDonald. The main reason for this being, the Company is still trying to build the brand loyalty and awareness in India. It is still in its developing stage and cannot focus on many aspects at the same time. Social Marketing McDonald’s believes in giving back to the community in which they do business. Besides commercial marketing McDonald’s also undertakes many social drives to build brand loyalty among the customers. Ronald McDonald House Charities (RMHC) works to improve the health and well being of children by awarding grants to organizations and supporting 206 Ronald McDonald Houses worldwide. RMHC has not yet been established in India. But McDonald’s India has undertaken many social activities like: • Supporting Health drives like Pulse Polio since 1998.
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McDonald’s Spotlight, an inter-school performing arts competition started in 1998 for schools all over Mumbai and Navi Mumbai to provide the students with an atmosphere for healthy competition. Over 120 schools participated in 1998, 1999 and 2000.
• McDonald’s has tied up with Nehru Science Centre, Mumbai (NSCM) in 2000 for a period of three years to bring the students of
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Mumbai a science quiz. This quiz has been conducted by NSCM for the past ten years. With McDonald’s, it hopes to get the contest to a new level.
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Having cleanliness drives with the BMC – like the one on 15th August 1997 for making Mumbai garbage free and joined in celebrating 50 years in India’s independence.
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HUMAN TOUCH
We're not just a hamburger company-serving people; we're a people company serving hamburgers.
With more than 500,000 people on the payroll at any one time, the McDonald’s System is easily one of the largest employers in the United States. One out of every 15 American workers got his or her first job from McDonald’s. It was at McDonald’s where they first learned about work routines, job discipline, and organizational teamwork. McDonald’s by now had replaced the U.S. Army as the nation’s largest job training organization. An unwritten rule during McDonald’s first decade prohibited the hiring of women in the restaurants. It was rationalized on the grounds that many tasks – such as carrying hundred-pound sacks of potatoes from the basement – were too strenuous for the women. But that was a thinly veiled disguise for the real reason: Kroc feared that female employees would attract too many teenage males who would convert McDonald’s into another high school hangout. But Kroc’s worst fears that attractive female crewmembers would convert McDonald’s into a teenage hangout proved unfounded and today, McDonald’s crews are 56 percent female, and fully women manage 46 percent of all units. Hamburger University Hamburger University is McDonald's worldwide management training center located in Oak Brook, Illinois. Designed exclusively to instruct personnel employed by McDonald's Corporation or employed by McDonald's Independent Franchisees in the various aspects of the business. All training programs begin with one essential ingredient: The Basics of McDonald's Operations.
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Founded in 1961, Hamburger University's has come a long way since McDonalds opened their first training facility in the basement of a McDonald's restaurant in Elk Grove Village, Illinois. Since that time they've moved Hamburger University twice and watched the size of classes grow from an average size of about 10 to more than 200 per class. Today, more than 65,000 managers in McDonald's restaurants have graduated from Hamburger University, now located in a 130,000 square foot, state-of-theart facility on the McDonald's Home Office Campus in Oak Brook, Illinois, with a faculty of 30 resident professors. Because of McDonald's international scope, translators and electronic equipment enable professors to teach and communicate in 22 languages at one time. McDonald's also manages ten international training centers, including Hamburger Universities in England, Japan, Germany and Australia. Equal Opportunities Policy McDonald's is an equal opportunity employer, ensuring that employees and job applicants are selected, trained, promoted and treated on the basis of their relevant skills, talents and performance and without reference to race, color, nationality, ethnic origin, gender, sexual orientation, marital status, age or disability. The company aims to ensure that no job applicant or existing employee is disadvantaged by conditions, requirements and policies that cannot be shown to be just and fair in support of this McDonald's Diversity policy promotes and sustains a working environment, which is free from unlawful discrimination, harassment and bullying. McDonald's regards all of its employees as members of a team where everyone's opinion is valued and everyone is regarded as equal in status and must always be treated with respect. The person responsible for this policy is the Human Resources and Training Director, but it is the responsibility of all employees, particularly managers and area management, to challenge questionable behavior and practices. The Human Resources department monitors the effectiveness of the policy at regular intervals and takes corrective action as necessary to ensure that it is being complied with. Employees who feel that they have been unfairly treated
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in any way regarding this policy are encouraged to use the remedies outlined in the Company's handbooks. Outlet in India McDonald's India is an employer of opportunity, providing quality employment and long-term careers to the Indian people. The average McDonald's restaurant employs more than 100 people in 25 different positions – from cashier to restaurant manager. McDonald's world class-training inputs to its employees can be seen in the present close to 2000 employees currently in Mumbai and Delhi. ? Manpower Planning: The Scheduling Manager is in charge of the manpower planning in the outlet. They have full timers who work for 9 hours and part timers who work for 3-4 hours. If they expect more customers (during holidays etc) then more part timers are recruited.
? Recruitment: Done by reference of the employees in the outlet or other
outlets. ? Organization and Salary Structure:
R e s t a u r a n t ( R s . 1 8 , 0 0 0 M a n a g e r 2 0 , 0 0 0
)
1 s t
A s s i s t a n t M a n a g e r ( R s . 1 1 , 5 0 0 )
2 n d
A s s i s t a n t M ( R s . 1 0 , 4 0 0 )
a n a g e r
S
h i f t
R u n n i n g ( R s . 6 , 5 0
F l o o r 0 )
M
a n a g e r
F l o o r M a n a g e r ( R s . 5 0 0 0 )
T r a i n i n g ( R s . 2 1 p
S q u a d e r h o u r )
C ( R
r e w M e m b e r s . 1 4 . 5 p e r h o u
r )
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? Training and Development:
Training is a continuous process at the McDonalds. It is the responsibility of the training squad to train the other employees. The training squads maintain training logs of the employees, which clearly states that which employee is to be trained, and on what station.
? The 3/30 Plan: According to this plan, the training squad has to train 3
people on three different stations in a month. One employee is trained on one station, say the vegetarian station for 10 days, and then for the nonvegetarian station for the next 10 days and so on. This is done till the employee becomes proficient on the station and is capable of handling the station on his own. ? Performance Appraisal: Every employee joins in as a Trainee Crew where he is given the Green Badge. After a period of 3 months, the employee is checked for the health safety, cleanliness and sanitation after which he is given the Yellow Badge. After receiving the Yellow Badge, there are 5 stations that the employee has to be proficient in:
1. Backroom Cleaning – This includes mopping the floors, clearing the
tables, maintenance of the machines etc.
2. Fried Products – This involves frying of the French Fries, Pizza Puff
etc. to the right degree.
3. Buns, Dress and Grill (BDG) – This includes grilling the bun and
dressing them properly. There is a time limit given to perform every function and the employee has to perform it efficiently, with minimum wastage.
4. Counter – The last station is of the counter handling. The employee
should be able to converse with the customers courteously and take proper orders.
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5. Personality – The last criteria is the overall personality of the
employee. McDonalds being in the service industry, having smart and courteous employees is of utmost importance to them. • The productivity record has to show 90+ points. The productivity is checked in various ways. For example – McDonalds has a policy if serving each customer within one minute on an average. The productivity at the counter is checked by the time taken by an employee to complete the order. For E.g.: If Freda (A service-counter in charge) has taken 2.5 minutes on a average to serve each customer in her shift, at the end of the shift, the shit running manager will speak to her and ask her the reason and accordingly ask her to try and improve. If this trend continues, Freda is trained further. • After the productivity record shows 90+ points, the employees have to appear for a documented written test where they must get more than 90 marks. • Having got a 90+ average of the two, the employee is promoted to the next hierarchy level. ? Shifts: McDonalds have different shifts for managers, full time employees and part time employees. Their main shifts consist of: ? Open Shift – 7:00 am to 4:00 pm ? Mid Shift – 12:00 am to 9:00 pm ? Close Shift – 3:00 am to 12:00 pm • McDonalds have a special night shift where the managers have to account for the day’s transactions, inventory, wastage etc. The night shift for the mangers is from 11:00 pm to 8:00 am. • They also have a night shift for the employees where the scrubbing of the entire outlet takes place. Also, each and every machine is opened and cleaned. The night shift for the employees is from 7:00 pm to 4:00 am.
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• Both the night shifts i.e. for the managers and the employees are done on rotation basis. Female employees are generally not allowed to do the night shifts. ? Holidays and Breaks: • The crew members are allowed to take 4 holidays in a month and the Managers can take 6 holidays in a month. • If an employee is working for the 7-hour shift, he gets a break for 1 hour after 4 hours and if an employee is working for less than 7 hours, then he gets a break for ½ hour. ? Employee Grievances: McDonalds call it as the RAP SESSIONS. Once in a month, the employees can vent their problems to the Area Sales Manager or the Operations Manager. The Branch Manager is not included in the Rap Sessions. ? High Employee Turnover McDonald’s in India faces a huge problem of high employee turnover. Recruiting and training employees is an ongoing process, which never stops at any of the outlets. On an interview with one of the ex-employees, it was found that the main reasons for the high employee turnover are:
•
The profile of the employees mainly consists of college students who want to used their spare time and get some fast money. As a result the turnover is extremely high during the exam seasons, and similarly, the availability is high during the holiday’s seasons.
• The employees feel that there is very slow growth in the company. It takes you 3 months just to get the yellow badge, and even after that, the promotions come very slow. • The salary packages are not very attractive.
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Changes in Consumer Perceptions
1999 From serving just Burgers
2001 To ice-creams, fries, shakes and pizza
Bland western food
Less spicy, non-oily, crisp, fresh and different
Expensive western restaurant
Affordable family restaurant, money well spent
Loud, for youngsters
Mature, calm, cultured, straightforward for families
Childish
Childlike, and young at heart
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Steps taken to improve customer service:
•
Guard placed at the entrance: From this year onwards, a guard has been placed at all the entrances to greet and welcome the customers Host and Hostesses: More employees are now placed in the front area than the back area to interact with the customers. Mystery Diner: Delegates of the company visit the outlets as normal customers and check if the service is being given properly and then report to the Head Office. These surprise checks keep the employees on their toes.
•
•
•
2 Meter Rule: Any employee coming within 2 meters distance of any customer has to greet and smile at the customer. Served in 60 seconds: This is an upcoming scheme of McDonald’s wherein every customer will be served within 60 seconds and if they are unable to do so, the customer will get free French fries. This scheme is going to be launched in McDonald’s Asia-wide.
•
•
Standardization: At McDonald’s, the way of doing each and every thing has been written down, and so has been the way to take down the order from the customer. They follow a 6-step rule. As soon as the customer comes to the counter they have to: 1. Welcome the customer 2. Take the order 3. Repeat the order 4. Take money 5. Give the ordered products 6. Greet the customer
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THE ROAD AHEAD
McDonald’s, that has become synonymous with urban living, is all set to break boundaries and go national. It is doing this through the arteries of the country — the national highways and expressways. Puckish travelers zipping from city to city will no longer have to be content with dhabas offering dal-roti. They can look forward to biting into burgers, french fries, McPuffs etc all. McDonald’s (India) is planning to start drive through restaurants on express highways across India. The first is being planned on the Mumbai-Pune highway this week and plans are afoot to have three more on the National Highway No. 1 in north India.For hungry drivers on the run, the company promises to deliver within 60 seconds after an order is placed. Theoretically, one can be back on the highway in just two minutes. Of course, the practical reality is that placing the order it could take a little bit more than the said two minutes. McDonald’s is projecting an income of 15 to 20 per cent from drive-through business on expressways in the immediate future. This is expected to grow to 40 per cent in the next five years. The company had a tied-up with public sector oil company Bharat Petroleum to set up restaurants at petrol pumps across northern India. Commenting on the clientele for the restaurant on the Mumbai-Pune expressway, which to be launched first, Amit Jatia, managing director, McDonald’s restaurant, Mumbai said, “We are expecting business traveller to frequent the outlet. Our survey reveals that 15,000 to 20,000 vehicles use the highway everyday. Of this, passenger traffic is around 12,000 vehicles per day and the rest is commercial. Besides the vehicular traffic, we are also targeting nearby towns to sustain business.” McDonalds will have to face competition from the more affordable dhabas, the roadside eateries that dot highways all over the country. The company’s confidence stems from a model already in place in north India. McDonald’s has a 170-seater restaurant at Noida near Delhi. “The restaurant at Noida attracts a lot of drive through business. Around 30 per cent of sales at this outlet are from drive through clientele like tourist buses and passenger
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traffic, that is, the business traveller,” said Vikram Bakshi, managing director, McDonald’s restaurant, New Delhi. McDonald’s is closely looking at options on National Highway. One as it is considered to be on of the busiest highways in India. “In the immediate future, we plan to have three restaurants on this highway — one each at — DelhiJaipur highway, Delhi-Ambala Highway and Delhi Ludhiana highway,” Bakshi added. While, an extension to expressways may be a recent development, it has been arrived at after looking into the business prospects, logistics and supply chain. Jatia says, “Drive through restaurants is only one of the options to meet McDonald’s target of 80 restaurants across India by 2003 with an investment of Rs 850 crore. Internationally, 40 per cent of the company’s business is from express highways.” With a strong backing of reliable supply chain, extensive advertising and efficient employees, McDonald’s is trying to fulfill all the customer challenges. Hence, we can truly say that ‘McDonald’s mein hain kuch baat!”
MCDONALD’S CASE STUDY
McDonald’s, the long-time leader in the fast-food wars, faced a crossroads in the early 1990s. Domestically, sales and revenues were flattening as competitors encroached on its domain. In addition to its traditional rivals— Burger King, Wendy’s, and Taco Bell—the firm encountered new challenges. Sonic and Rally’s competed using a back-to-basics approach of quickly serving
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up burgers, just burgers, for time-pressed consumers. On the higher end, Olive Garden and Chili’s had become potent competitors in the quick service field, taking dollars away from McDonald’s, which was firmly entrenched in the fastfood arena and hadn’t done anything with its dinner menus to accommodate families looking for a more upscale dining experience. While these competitive wars were being fought, McDonald’s was gathering flak from environmentalists who decried all the litter and solid waste its restaurants generated each day. To counter some of the criticism, McDonald’s partnered with the Environmental Defense Fund (EDF) to explore new ways to make its operations more friendly to the environment. Facts McDonald’s roots go back to the early 1940s when two brothers opened a burger restaurant that relied on standardized preparation to maintain quality— the Speedee Service System. So impressed was Ray Kroc with the brothers’ approach that he became their national franchise agent, relying on the company’s proven operating system to maintain quality and consistency. Over the next few decades, McDonald’s used controlled experimentation to maintain the McDonald’s experience, all the while expanding the menu to appeal to a broader range of consumers. For example, in June 1976, McDonald’s introduced a breakfast menu as a way to more fully utilize the physical plant. In 1980, the company rolled out Chicken McNuggets. Despite these innovations, McDonald’s tremendous growth could only continue for so long. Its average annual return on equity was 25.2% between 1965 and 1991. But the company found its sales per unit slowing between 1990 and 1991. In addition, McDonald’s share of the quick service market fell from 18.7% in 1985 to 16.6% in 1991. Plus growth in the quick service market was projected to only keep pace with inflation in the 1990s. McDonald’s faced heightening competition on several fronts. First, its traditional rivals—Burger King, Wendy’s, and Taco Bell—were eating into its margins through promotions and value pricing strategies. Taking a leaf from McDonald’s own playbook, Sonic and Rally’s were using a very limited menu
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approach to attract time-strapped consumers. Finally, Chili’s and Olive Garden were appealing to diners looking for something a little more enticing that the familiar Golden Arches for their families. In the late 1980s, McDonald’s began recognizing the importance of maintaining an ecologically correct posture with the public, which was becoming more concerned about the environment. For example, in 1989, 53% of respondents in one survey revealed that they had not bought a product because they didn’t know what effect the packaging would have on the environment. Closer to home, a 1990 study showed that each McDonald’s generated 238 pounds of on-premise solid waste per day. It’s no surprise, then, that McDonald’s sought a way to reduce its solid waste while providing a more environmentally acceptable face to the public. Beginning in 1989, it partnered with the Environmental Defense Fund, a leading organization devoted to protecting the environment, to seek ways to ease the company’s environmental burden on the landscape. Together, EDF and McDonald’s considered its impact on a wide range of stakeholders—customers, suppliers, franchisees, and the environment. The company gave its franchisees much autonomy in finding ways to eliminate environmental blight. The company’s hope was that from these divergent approaches, it stood a greater chance of finding solutions with broad applicability than if it had tried to pursue a one-size-fits-all approach from the outset.Some of the environmentally inspired solutions that came out of the collaboration with EDF were the: • Introduction of brown paper bags with a considerable percentage of recycled content. • Solicitation of suppliers to produce corrugated boxes with more recycled content, which had the twin effect of reducing solid waste and building a market for recycled products. • Abandonment of polystyrene clamshell containers to hold sandwiches in favor of new paper-based wraps that combined tissue, polyethylene, and paper to keep food warm and prevent leakage.
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Analysis
McDonald’s Sustained Prosperity The secret of McDonald’s success is its willingness to innovate, even while striving to achieve consistency in the operation of its many outlets. For example, its breakfast menu, salads, Chicken McNuggets, and the McLean Deluxe sandwich were all examples of how the company tried to appeal to a wider range of consumers. The company has also made convenience its watchword, not only through how fast it serves customers, but also in the location of its outlets. Freestanding restaurants are positioned so that you are never more than a few minutes away by foot in the city or by car in the suburbs. Plus McDonald’s is tucking restaurants into schools, stores, and more. Key Threats The key threats to McDonald’s domestically are the lack of growth opportunities. The market is well saturated, and it would difficult to achieve double-digit growth. Other concerns are a newfound emphasis on healthier eating. Most of McDonald’s most popular fare probably in some small way contributes to the increasing incidence of cancer, heart disease, and diabetes among the population. But I feel the key threat to McDonald’s continued success is its very ubiquity. Because McDonald’s are everywhere, the dining experience is never special. And as Baby Boomers age and become more affluent, it is likely that they will leave behind their fast-food ways, if only to step up to moderately priced restaurants like Olive Garden, Bennigans, and Pizzeria Uno. These chains have the added advantage of serving higher-margin alcoholic drinks. McDonald’s, meanwhile, has to continually battle Burger King and Wendy’s, which leads to an erosion of margins for everyone. Even alliances with toy manufacturers, while popular with consumers, do little for the bottom line because the cost to run these promotions can be quite expensive. Responding to Burger King’s October 1 Announcement
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The October 1 announcement from Burger King that it would begin offering table service is not much of a threat at all. You can try to dress up fast food, but its still fast food. I couldn’t imagine this being a potent draw for consumers. McDonald’s best course is to ignore this development as irrelevant. As the market leader, McDonald’s does not need to respond to every competitor’s initiative. Indeed, doing so would have the effect of making McDonald’s look reactive and less like a leader. The advantage of not responding to Burger King’s initiative is that the company can preserve its resources for other marketing thrusts that may provide a bigger payoff. The disadvantage of not responding to Burger King’s initiative is that you allow the firm to establish itself in a unique way in the minds of consumers —that of a fast-food restaurant that provides sit-down service. But again, is this inherent contradiction of fast-food fare and upscale dining experience likely to resonate with consumers? I would say no. If Burger King’s initiative does prove popular with consumers—as evidenced by expanding sales and market share—McDonald’s would be forced into catch-up mode. But I think that this is a risk that the company should be willing to take. Promoting Flexibility through Its Operating Strategy The key thing that McDonald’s operations strategy has to support is experimentation. Now somewhat long in the tooth, McDonald’s needs a breakthrough that will provide new avenues of growth. It has a long history of such experimentation, which has resulted in some new profit centers like Chicken McNuggets and the breakfast menu. Some later turn out to be duds like the McLean Deluxe, but inevitably experimentation in limited outlets offers McDonald’s a way to retain its key strengths—quality and consistency— while continuing to evolve for new palates and pocket books. McDonald’s and the Environmental Defense Fund In some ways, partnering with the Environmental Defense Fund was a masterstroke. It brought both respectability and valued expertise to its environmental efforts. It also provided a primetime venue for EDF to make a
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difference. Any successes, even if only incremental improvements, would have major ramifications because of the sheer size of McDonald’s operations. McDonald’s should continue its partnership with EDF. With ecology a growing concern among consumers, it makes sense to be a good corporate citizen and get all the public relations accolades that go along with such an alliance. It also pays off in the bottom line by reducing shipping costs for supplies as well as garbage removal fees. McDonald’s would do well to stay in the vanguard of corporations who have become environmentally aware. If it tries to shirk its responsibilities, it can foresee a public relations nightmare in the making. But if it does manage to come up with some breakthroughs through its collaboration with EDF, it can score a tremendous amount of goodwill with the public, which may even provide a halo effect to mitigate any other PR troubles. How far should McDonald’s go on environmental issues? There is definitely a public relations benefit in being seen as an environmental leader, and the collaboration with EDF goes a long way in making that happen. Still McDonald’s has had a lot of success in giving its franchises some latitude in developing new solutions. The line in the sand in determining how far McDonald’s should go with its environmental efforts is determined by the cost of the initiative relative to the hard-dollar benefits and harder-to-quantify public relations buzz it gets from being in the forefront on environmental issues. The bottom line is that environmental efforts can’t detract the company from its primary mission of providing consistent quality to consumers. If environmental efforts start to be a drag on the company’s future profits, it’s time to ease up. Ideally environmental initiatives should pay for themselves by reducing other kinds of costs. Dealing With the Product Range Explosion McDonald’s had done well with a fairly limited product range. But falling per unit sales is a danger sign for the firm. With competitors gaining ground on McDonald’s, it may indicate a need to refresh its product line. Perhaps the best way to do that is by rotating in a couple highly promoted new menu items. This
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would have the effect of enlivening the product menu, without the need to go head to head with competitors on price. This slackening of per unit sales might also indicate that McDonald’s critical success factors have changed. Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm. At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for dinner consumers. To maintain consistency in new products as it expands the product line, McDonald’s must rely on test marketing new menu items in pilot locations. This approach will let the firm identify which items are likely to prove popular with consumers while ensuring that the company can deliver new products with consistent quality nationwide. McDonald’s already has a history of doing this so it will not require major changes to its operations strategy—at least initially. If the product line-up gets too large, then the task of maintaining quality becomes exponentially harder. The trick is to consider how to eliminate some of the existing menu items when you introduce new ones, while making sure the staff is fully trained in how to execute these products successfully. Because McDonald’s has pretty well saturated the U.S. market, it’s only real opportunities for growth lie abroad, where the competition is not so cutthroat or by introducing new restaurant concepts under brands other than McDonald’s. After all, McDonald’s is known for fast food. It’s not really a pleasant dining experience, just a cheap and convenient one. I feel that McDonald’s has reached the point of diminishing returns with the McDonald’s brand and now needs to roll out new types of restaurants. Indeed, McDonald’s has the opportunity to apply its core competencies— scrupulous adherence to quality standards and continual promotion of experimentation—in new venues. Imagine if you will, McDonald’s opening a new casual dining restaurant under the name of Splendor. It could then franchise that concept nationwide and get some of the dollars from consumers who have grown past fast food. But its fastidious approach to operations would ensure that consumers everywhere would experience the same dining
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experience—a tremendous advantage for consumers who don’t want to be surprised with a bad meal. McDonald’s could try a number of concepts simultaneous in different parts of the country. Those that seemed promising could be rolled out further. The duds could be left to die quickly. While this will be an expensive undertaking, it holds the potential to unleash new areas of growth in a maturing market. In brief McDonald’s faces some difficult challenges. Key to its future success will be maintaining its core strengths—an unwavering focus on quality and consistency —while carefully experimenting with new options. These innovative initiatives could include launching higher-end restaurants under new brands that wouldn’t be saddled with McDonald’s fast-food image. The company could also look into expanding more aggressively abroad where the prospects for significant growth are greater. The company’s environment efforts, while important, should not overshadow its marketing initiatives, which are what the company is all about
EMPLOYMENT OPPORTUNITIES & BENEFITS
Macdonald Page offers a variety of employment opportunities, including:
• • •
Positions for experienced CPAs; Positions for recent college graduates with an accounting degree; Internships for college juniors who are enrolled in accounting programs; service experience.
• Opportunities for bookkeepers with payroll, general ledger, and client They also offer: • Competitive salaries
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• A comprehensive benefit package, including liberal personal time, minimal waiting periods for enrollments to 401(k) and multiple health plans; • Continuing professional development and education reimbursement; • Quality of life programs including: half day Fridays during summer months; year-round corporate casual business attire; on-site parking; limited overnight travel; and flexible work schedules; • A commitment to computer technology; • Broad client base with industry specialization; • Advancement opportunities; • A mentoring program; • Confidential interviews.
SURVEY OF CUSTOMER
?
Objective of the survey: To find out the perception of McDonald’s in the minds of the customer. Methodology: Primary data was collected as it gives first hand information and also the data can be adjusted according to the needs. The tool used was the questionnaire method. This method was chosen as it obtains standardized results that can be tabulated and treated statistically. A broad category of the questions asked were: 1. 2. 3. Frequency of visit Favorite Product Favorite Advertisement
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?
4. 5. 6. 7.
?
Is McDonald’s value for Money? French Fries Issue Unique Selling Proposition of McDonald’s Suggestions to improve McDonald’s
Sample: I conducted a survey of around 100 customers of McDonald’s. The profile was mainly distributed in 3 categories: Categories Below 15 years Number of Customer Interviewed 28 customers 42 customers 30 customers
Between 15 years to 25 years Above 25 years
?
Processing of Data: The data collected from the questionnaires was tabulated and the percentages were derived. For e.g.: If out of 100 customers, 54 are veg and 46 are non-veg, the percentages where taken and analyzed.
The findings of the survey were as follows: Ratio of Vegetarians and Non-Vegetarians visiting McDonald’s
The percentage of vegetarian people visiting the restaurant is slightly more than the non-vegetarians. The vegetarian customers feel a lack of choice in the products as compared to the non-vegetarians who seemed to be comparatively
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satisfied. Since McDonald’s has an equal footfall of vegetarian customers, it would be advisable to increase its vegetarian product line.
Favorite Product
Even after the big issue over french fries, they remain to be the most favorite product of most of the customers of McDonald’s. Some of the customers love to visit McDonald’s just to have the French fries. The McChicken Burger and the McVeggie Burger are the second favorites.
Do you find the product line satisfactory?
Only 32% of the customers find the product line satisfactory. Rest all of them find it either okay or not satisfactory at all. Customers would like to have more variety to choose from. They feel that McDonald’s should include more deserts and more items like the Pizza McPuff besides the burgers. Favorite Advertisement
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The first advertisement of McDonald’s (Stage Fright) remains to be the most popular and recalled advertisement. While these advertisements are very popular amongst the children and teenagers, 26% of the customers, mostly consisting of the elders failed to remember any of the advertisements or simply said that they didn’t like them.
Do you find McDonald’s value for money?
Most of the parents gave a positive answer to this question, but the teenagers and customers below the age of 25 didn’t find McDonald’s value for money at all. The main reason for the parents preferring McDonald’s is because their children’s like it and hence they don’t mind paying any amount. The customers below 25 years find it a good place to hangout and like the food, but don’t find it worth the cost. Problems faced in the visits to McDonald’s
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Long queue was a major problem of all the customers. They said that the waiting period was too long, especially in the evenings and weekends. They felt that even thought the service is fast; McDonald’s could do with increasing the number of counters. Wrong order was an issue with the Jain customers who had to change their burgers at least twice to get a Jain burger. The customers below the age group of 25 felt that the outlets played outdated music, which irritates them. But nearly 43% of the customers said that they haven’t had any problems at all in any of their visits. Even if they had some small issues, the employees of McDonald’s solved them very well. Did the French Fries issue make you hesitant from visiting McDonald’s?
64% of the customers said ‘No’ to this question. They felt that a Multi-national company like McDonald’s would never make such a big blunder in a religious country likes India. Unique Selling Proposition of McDonald’s
Food remains to be the favorite part of McDonald’s. Hygiene ranks the next with 24%. This was a popular answer amongst mothers as they found it to be a very hygienic place for their children. The young and energetic ambience of
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McDonald’s is also liked by all. Other USP’s of McDonald’s include good crowd and courteous employees.
Suggestions to improve McDonald’s
22% of the customers were very satisfied with McDonald’s and said that it is fine the way it is. On the other hand, 24% of the customers want the prices to be reduced and also have more variety to choose from. Some of them would even like to have home delivery. Surprisingly, none of the Indian customers suggested starting ‘drive-ins’ which are extremely popular in the other countries.
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? Recommendations based on the survey are: C More items should be added to the product line, especially in the vegetarian category.
C
The prices need to be slashed down. The French fries, chicken burger and the veg burger are the most popular items, so their process can be reduced to attract more customers.
C The advertisements can also focus on the hygiene factor of McDonald’s, for e.g.: McDonald’s can stress on the fact that they do not serve any burger, which has been prepared but not consumed for 10 minutes. C The peak time management should be improved. More counters should be opened during the peak hours. C The music played at the outlet should not be outdated.
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CONCLUSION
To sum up, there is a strong possibility that if the company fails to recognize the new competitions, shifting of consumer interests, and the social trends or innovative technologies, it will loose its market share. Previously, McDonald’s emphasis on adding new restaurants for near 5 years, more than 50% of increase in new restaurants opened. Unfortunately, there was only 2% of increase in the sale of the food. So, in the year 2003 McDonald’s decided to change its focus on increasing sales at existing restaurant and reduced capital spending which allows for a sizeable amount of cash be returned to shareholder. For achieving their objectives, the McDonald’s strategy should be attract more new customers, encourage existing customers to visit McDonald’s more often, build brand loyalty and, ultimately, create enduring profitable growth for the company.
BIBLIOGRAPHY
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? www.google.com
?
www.mcdonalds.com
? www.wikipedia.com ? “McDonalds – Behind the Arches” – John S Love
SAMPLE QUESTIONNAIRE
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Name: _________________________________ Age: __________________________________ Occupation: ____________________________ Contact number: ________________________ Email ID: ______________________________ 1. Do you know that McDonald’s is the largest fast food chain in the world? ? Yes Mind? ? Yes ? Yes ? No ? No ? everyone ? No one ? Alone ? Other ? Once a month ? Very rarely 3. Have you been to McDonald’s before? 4. In your family who likes to go to McDonald's? ? Children ? Parents ? Friends ? Once a week visit increased? ? Yes ? No 8. What do you like the most in McDonald’s? _________________________________________________ 9. How do you rate the service in McDonald’s? ? Very good ? Yes ? Yes ? Good ? No ? No ? Average ? Bad 10. Are you satisfied with the quality of food they provide? 11. Do you think McDonalds provides 100% Hygienic product? 12. Are you aware that McDonald’s undertake social activities for the growth of children and other needful people?
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? No
2. When you hear the word burger does, McDonald’s has come in your
5. With whom do you like to go McDonalds? ? Family 6. How often do you go to McDonald’s? ? More than once a week 7. With the introduction of new Happy Meal price menu has your number of
? Yes McDonald’s? ? Cheap ? Near
? No
13. According to you, how is the relation between the price and the service of ? Reasonable ? Far ? Expensive
14. What is the distance of the nearest McDonald’s from your place? ? Very far 15. What do you suggest what could make McDonald’s better? __________________________________________________
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