INTERNATIONAL BUSINESS PROJECT

Mc Donald’s India

MADE BY:

SHUBHAM GOEL (09502916)

VIVEK RATHI (09502921)

ARVIND KR. CHAUHAN (09502930)

HEMANT PUNIA (9512010)

CONTENTS

1. History of McDonalds2. Macro Environment issues

1. Political environment2. Economic environment3. Socio-cultural environment

3. Micro Environment issues1. Competitive intensity2. Customer characteristics

4. Company issues1. Competitve Strategies2. Diversification3. Standardisation Vs Adaptatiion4. Oraganisational structure5. Motivation for market entry

6. Modes of market entry

7. Performance

5. Swot analysis

6. Conclusion

History of McDonalds

McDonald is the world famous fast food restaurant. The idea of McDonald’s was introduced by two brothers Mac (Maurice) and Dick (Richard) McDonald in California. Their father Patrick McDonald in 1937 was having a hot dog cottage called as Airdrome restaurant near the airport. In 1940 the restaurant was renamed as McDonald’s Famous Barbeque. In 1940 both brothers came to a conclusion that most of their profit comes from selling hamburger so they made their menu very simple by selling only Hamburger, cheeseburger, soft drinks French fries and apple pie. In 1954 a turning point came in McDonald’s brother history. Ray Kroc a seller of Multimixer milkshake visited McDonald and he liked the idea of McDonald. McDonald’s corporation was build in those times and as a result Kroc started expanding their business by opening franchises for mcdonalds.1960 McDonald’s advertising campaign “look for the golden arches” gave McDonald’s sale a big boost.1965 McDonald corporation went public. In 1968 McDonald open its 1000th restaurant. In 1974 McDonalds started their business in UK and New Zealand. In 1980 McDonalds was facing very big competition from its rival Burger King and Wendy but McDonald with its innovation was experiencing boost in its sales. In early and mid nineties McDonalds was having decline in their sales and as a result they start improving their business. Taste was improved and some new menu items were introduced. McDonald introduced first Kosher McDonald in Jerusalem and Halal McDonalds in India(1995 and 1996 respectively).McDonald start creating healthy image and invested heavily on refurbishment in 2000’s. Today McDonald’s has more than 33000 outlets and is operating in 125 countries. It is the world leading brand in fast food.McDonald started their business in India in 1996.They start their business in India’s capital New Delhi they choose a busy residential area Vasant Vihar. McDonald India is 50-50 partnership between McDonald USA corporation and Two Indians (Amit Jatia Hardcastle Restaurant ltd Mumbai and Vikram Bakshi Cannaught plaza restaurant Delhi).McDonald as of now has 210 stores in India. Majority of Indians are Hindu and cows are sacred to them. For McDonalds to sell beef was almost impossible. The second majority population is Muslim and they eat Halal food. It was a big challenge for McDonald’s as there were many protest against McDonalds’s McDonald changed their menu according to local community for example they introduce Maharaja Mac instead of Bic Mac. Their menu is full of some spicy products as we know that Indians use spice in

their dishes in abundance. About 75 % of the menu of McDonald’s has been indianised and specially designed to woo Indians. McDonald’s passed through some tough times but eventually managed to survive in that different culture and different religious belief. McDonald by now has a big presence in India and is trying to extend this ahead. Over all McDonalds serve more than 47 million customers every day.

MACRO INVIRONEMT

POLITICAL INFLUENCES:These are some influences a company doesn’t have any control of.USA politically is well suited for business of McDonalds. McDonald is very popular in USA. But government is trying to control marketing of fast food because of health concern such as cholesterol, cardiovascular and obesity issues. Good relations in terms of creating jobs and tax revenue for government is a must to succeed in any market. India is very rich country in terms of politics. The world largest democracy is present in India. But being nationalist country they create some difficulties for foreign entries. Bhartiya Janata party is one of the leading Hindu national party and they are against fast food chains as they want to see only vegetarian restaurants in their country. Their party members always protest against fast food using meat in their menu. Big risk for McDonald’s is BJP. Good news is that trends in India are changing and young people like to eat fast food. Second good news is that India is changing slowly from nationalistic society to liberal mind set up and Congress party in power is the main prove of liberal society. McDonalds expanded very fast in the last decade.

ECONOMICAL INFLUENCE:Economical variables such as currency exchange, employment, Interest rate, tax ratio and need of international supply. Most of the organisations depend on foreign supply of raw materials for their products making. Currency exchange also have a great impact on any organistion.USA has a High tax ratio, Low unemployment developed country, dealing in international currency (Dollars).Business for McDonalds in USA is already established and low risked but for India high unemployment rate, dealing in Rupees as currency and millions of people living below poverty line is a concern for McDonalds but India is having a booming economy, low tax rate and availability of labour in abundance and development of middle class society in India is a positive sign for McDonald’s future.

Sociocultural influences:Culture and society has a big impact on any organisation sales. McDonalds in USA is serving a liberal society. Religion has not much effect on McDonald’s. Culture is very much simple. But in India society is very versatile. Though India

is heavily populated but still Hindu’s don’t eat meat, Muslim only eats Halal and they don’t eat pork. In India religion has a very big impact on society. For McDonald it is a big concern. But in India life style is changing, earning power is increasing, middle class is getting bigger in its size and people like to eat outside in restaurants this has a very good impact on society.

Technological influence:One positive benefit of globalisation was technological advancement. Although McDonald’s doesn’t use too many complicated machines in their food production but still they need highly competitive technology. Technology is needed for example in supply chain management, order taking, Inventory control, easy and quick payment procedures .Use of technology can make management more reliable, effective and cost saving in short term as well as long term. Customer’s happiness after getting what they are looking for on time and in a disciplinary way make them come over and over again. In USA McDonalds use very effective and expensive technology to be in a very competitive position to their rivals. In India as franchises they use high technology. They use very good till system, good and disciplined order taking and well managed staff who knows the proper use of technologies inside the store.

MICRO ENVIRONMENTAL ISSUES:

Competitive Intensity:Competitive intensity of McDonald’s can be determined with Porter’s five forces. Porter five forces is business strategy formed by Michael Exporter of Hayward business school in 1979.he determined five forces which actually determines attractiveness of the market and competitiveness. These five forces are1) Threats of new entrants2) Threats of substitute3) Bargaining power of customer4) Bargaining power of supplier5) Competitive rivalry with in organisation.

1) Threats of New Entrance:Entry to a restaurant Business is very difficult. It is hard to make a prominent brand name. There is high research and development costs and high cost of entry. Strong brands already in competition make it more difficult such as McDonald’s, Pizza Hutt, Domino’s etc. New entrants face a very high competition in the start of the business. In USA and India both Entrance of new organisation is very difficult as explained above.2) Threats of Substitute:The substitutes in this industry are very high. People can choose variety of products they can either choose Burger King, KFC, Indian Cuisine, Indian local shops, Indian Vegetarian restaurants. The same situation is faced by McDonalds in USA and all over the world.

3) Bargaining power of customers:Bargaining power of customers refers to pressure a customer can exert on a business to get good quality of food, good customer service and low price. Bargaining power of customer in this industry is low. As McDonalds provide a standard service, one price strategy and quality of food. Customers have low bargaining power throughout the world in food industry.

4) Bargaining power of supplier: Bargaining power of buyer in this industry is low. Situation can change if the main ingredients are not available. But with McDonald’s simple menu and

working with many suppliers, they are not facing a big threat. So the bargaining power is relatively low.

5) Rivalry within the organisation:Fast food restaurant industry is very competitive. The competition is as high as all the organisations want to get hold of customer base. Food industry all over the world has the same criteria because there are many small businesses operating in abundance and also top brands. McDonald’s knows about the customers taste and preferences all over the world. So they started Mccafe (morning breakfast).so McDonald’s is providing quality food from early morning till late night in order to get competitive edge in the market.

Customer Characteristic:India is the second most populated country in the world. It has 28 states and almost 4 times the population of USA. India has more than one billion population. Three fourth of Indian population lives in Urban areas. Though per capita income is very low in India but still people like to spend on costly products and eating out. Out of millions of households in India 49% lives on low income, 30% lower Middle income, 12% Middle income group, 5% Upper Middle income group and 4% high income group. Comparing this with USA where middle income group is very high. Consumers in India are highly family oriented. McDonald’s targets high income earner, Middle income earner and lower middle income earner in India. Indian consumer is getting brand awareness through internet, TV, Newspaper, Radio, Magazine etc. Middle income group is getting bigger in size day by day as a result of economic boost in India and that is very good news for McDonald’s. Indian consumers are now getting environmental awareness. They like to use Eco-friendly products and McDonalds is very helpful in terms of packaging, and recycling. Family system gives a big chance for McDonalds to get their sale rise as Indians are buying food in bulks. Indian consumers are becoming very open minded which is a positive sign for McDonalds. For McDonalds to succeed as they are now they should go to expand in urban areas as well as rural areas and target middle and lower income earners and beside this they should introduce certain products which can be afforded by low income earners. Customers like spicy foods and McDonald has introduced many products which are spicy and tasting according to the preference of Indians.

COMPANY ISSUES:

Competitive Strategies:

As we know fast food industry proved to be very competitive industry. McDonald’s from its day first has always tried to have strong competitive advantage over its rival. This is the only way for McDonald’s to survive in globalised environment. McDonald’s strong rivals KFC, Dominos, Pizza Hut and Subway are also operating in India as well as USA. In the fast food most important thing for some customers is how quickly you take order and ready the meal for customer.KFC and Jumbo King are offering very quick service to customers and in this way taking customers from McDonald’s .McDonalds has tried very well to overcome this advantage by making and readying its food as quick as possible. McDonalds is trying to improve its graph for customer satisfaction and they are investing heavily throughout the world including India. McDonalds uses Wi-Fi and they are trying to emphasise on demographic characteristic of its customers in the area. Each month McDonald’s add something special in its menu. To check McDonald’s quality and reliability administration has developed a very unique idea of Gap buster visiting McDonalds as mystery customer. They are expertise who comes in the form of a customer and after serving give credits scoring to the store. McDonald has introduced McBreakfast from 6 am to 11 am.McDonald’s in its competitive strategies is emphasising to target customers in the new urban areas. McDonald’s Indian menu offers very competitive strategy for McDonald’s. Vegetarian products, Halal and non vegetarian foods for its customer is a unique and successful idea in India. Kids like McDonald’s in India as they are giving free toys to customers who buy happy meal deals. McDonald’s has actively invested in Discount vouchers given as a leaflets, newspapers, Magazines certainly is a good business strategy and it has boosted McDonald’s customer number, Business and sales.

Diversification:McDonald’s has diversified product range in India and all over the world. Due to diversified nature of products McDonald’s is famous among masses. They offer McBreakfast, Lunch and Dinner, Coffee and many more diversified products. Now if McDonalds move to fully new business for example Hotel (McHotel) will be a concern. According to guardian news moving to totally new

business will damage the image of McDonalds. If they are really interested they should do a partnership with another company. As Burger King has done it. Landor marketing Director said move like this will certainly change the fundamentals of the company. Diversification can be revealed from Indian market.75 % menu has been Indianised. Halal food for Muslims has been introduced. McDonald’s happy price menu in India, the 5p’s and flexible operating platform all shows McDonalds to be a diversified organisation.

Organisational Structure of McDonald’s:McDonald’s has a centralised organisational structure. Centralised structure means the decision making comes from top management in the hierarchy and people on the floor are not contributing to the decision making. The decision making system is very much Bureaucratic. In centralised structure main decisions are made by top level management. McDonald’s all over the world has the same structure and they have to follow all the decisions from the parents company as they are working as a franchise. Most of the fast food chains (for example KFC, Burger King Etc) have the same centralised structure. Centralised structure has some advantages and disadvantages. Advantages like Common policy all over the world can easily be revealed and practised. Other parts of the Business are stopped from being too independent. Central control is easy to handle. It has great Economies of scales. Specialisation can be used greatly. Disadvantages include some time too much bureaucratic organisation leads to extra layers in hierarchy. It can reduce motivation in staff as we go down the hierarchy because of lack of involvement in decision making process. Customers are not benefited some times as there is a need of quick decision making.

Standardisation Vs Adaptation:

Standardisation:McDonald’s has a slogan.” Think globally and act locally”. McDonald’s sell standardised product. The taste make up, ingredients, looks, weight etc will be similar in one part of the world to the other part of the world. Cheese Burger in United Kingdom will taste similar to a cheese burger in USA. Think globally and act locally can be proved in India as McDonald’s in India has changed its menu list. Mc Maharaja Burger and McVeggie burgers have been introduced looking to the customers believe in India. Similar experience has been exercised

in Middle East and Fiji. In Middle East eating of Bacon is banned by government. Halal food is served in Middle East. McVeggie Burger in India will taste the same in comparison to McVeggie burger in Fiji. McDonald’s sell standardised products. All the products should be looking, tasting, weighing and prepared in the same way across the globe. McVeggie burger was prepared in India after Research and Development was conducted purely in India.

Adaptation:McDonald’s follows strategy of product adaptation. McDonald’s slogan”thinks globally and acts locally” is the best example. The best example for McDonald’s adaptation strategy will be India. McDonald’s cannot use beef Tallow to fry the fries and burger cutlets (Cows are sacred due to religious belief of Hindu’s).Bacon cannot be used in Middle east as they are Muslim countries and it is against their religious belief to eat pork. Products are tailored according to the personal taste of the country people where it operates. Due to adaptation McDonald’s menu in various countries is different.Motivation for Market entry:Parent company of McDonald’s USA was aware of some facts that motivated them to enter Indian market. Some of them are given below. The world’s second largest country by population after china. India’s population is 4 times more than USA. India call itself the most democratic nation in the world so it means all the decisions are made by parliament and not one person or dictator who can freeze assets for a company in any kind of bad relations emerging. Brand awareness is improving day by day, literacy rate is improving, middle class is getting larger , economy of India is booming (now counted in BRIC ‘s nations which means Brazil, Russia, India and China they are the fastest developing countries and future economic power),Unemployment is reducing, Laws are flexible for foreign businesses. All these facts contributed to motivation of McDonald have to enter Indian fast food Market.

Modes of Market entry:There are different ways a company can start opening their business in another country. For example franchising, licensing, Joint Venture, wholly owned subsidiary etc. But McDonald’s entry to India involved joint venture and Franchising technique.

Franchising is the right a firm acquires from another firm that allows them to do particular business activities, such as service or selling the good, under the name ofA specific firm, e.g. McDonalds. In Franchising a company follows strict rules from its parent company. McDonald’s have 210 stores in India. McDonald’s all over the world has almost 85% of franchises. The benefit of franchising is that in short period a company expands its business. The risk involved for parent company to move into another country and invest heavily can sometimes be too risky but when local people start doing it by themselves, the risk level is minimised. Quality control is difficult with franchising.Although McDonald’s Indian is a 50-50 joint venture company managed by Indian.

Performance:Much of retail is struggling in India but McDonald’s has been seen unaffected and it’s planning on accelerating its expansion on the Indian subcontinent. Mr Jatia who is managing half of the Indian franchises said number of customer is jumping 10% to 15 % each month compared to a year ahead. People of India are now relying on McDonald’s. McDonald’s adaptation policy has boosted its sales. McDonald’s annual sale throughout the world is $29 billion annually. Burger king is the second largest fast food organisation in terms of sales and is strong competitive rival. Due to company having a customised menu in India McDonald’s is getting popular day by day. Performance can be measured in terms of outlets opened by McDonalds in the past years. In 2010 and 2011 McDonalds opened 80 stores in India. McDonald’s India just accounts for 0.37% of the whole sale. But the potential is so high and are expecting to get higher in future. Although McDonald’s is facing certain problems like roads are not in very good condition for transport, power supply shortage etc but still sales rise and customer satisfaction shows that McDonald’s in India is performing very well.

Short, Medium and long term strategies employed:

Strategy is a planning that is used by an organisation to achieve its goal and objectives. Short term strategy starts from a minute to 6 months, medium account from 6 month to a year and long term mean 5 years or more strategy. In short term McDonalds is trying to bring in innovation and make customer satisfy. Day to day issues are planned to satisfy customers. New products are introduced each month. In medium term they are trying to maximise its profit and sales. In long run McDonald’s is planning to open new branches across India and Indian McDonald’s sale which accounts only 0.37 % of overall sale of McDonald to be taken to 0.50 percent and more in the coming years.

SWOT ANALYSIS

SWOT analysis is a strategic planning method used to evaluate strength weaknesses, opportunity and threats involved in a project or in Business. SWOT analysis will give us a quick review of an organisation current status.

Swot analysis for McDonalds in India

Strength:McDonald’s is a market leader in the fast food industry. McDonald’s has a very strong brand image. McDonald has expanded its business to more than 125 countries with more than 33000 outlets throughout the world. McDonalds has one competitive advantage and that is Strategic location. In India they are located in busy shopping malls, Airports and busy drive through.Weaknesses:McDonald’s has created very successful brand image but the market segment is too focused on Kids. McDonald’s is often related to unhealthy food and obesity. Employee turnover rate is so high. These all are weaknesses of McDonald’s in the world and India in particular.Opportunity:McDonald’s can introduce healthy food consisting of low calories items. They should put more efforts in Research and Development. Management should try finding ways to reduce food wastage which leads to cost control. New products with different variety should be introduced to capture the market.Threats:McDonald’s is facing major competition from its rivals KFC and Burger King all over the world. In India local curry shops are offering great challenge to McDonalds. Company rapid growth has made McDonalds very vulnerable to other countries economic slowdown. Press associating McDonald’s with obesity destroys McDonald’s image. McDonald’s in the past has been sued for its unhealthy products. McDonald’s should try and solve these problems by investing heavily and effectively in research and development.

CONCLUSION:

McDonald’s is considered to be the King of the fast food. To achieve this greatness McDonald’s has tried hard for ages to prove itself in the competitive environment of Fast food. The key factors in success of McDonald’s in my view is innovation, customisation, good management and above all best Marketing strategies adopted by McDonald’s. McDonald’s in India has a very bright future because of the customer’s bank, customised approach from McDonalds towards its customers and above all the strong brand Image.