MCDONALDS CORPORATION

Background
McDonalds Corporation, established in 1955, owns one of the worlds most well-known and valuable brands and holds a leading share in the global branded quick service restaurant segment. The Corporation has more than 30,000 restaurants in 119 countries serving 47 million customers each day. McDonalds entered India in 1996 through joint ventures with two Indian entities, Hardcastle Restaurants Pvt. Ltd. and Connaught Plaza Restaurants Pvt. Ltd. Hardcastle Restaurants Pvt. Ltd. owns and operates McDonalds restaurants in western India through a 50-50 joint venture with the parent company. Through a similar partnership, Connaught Plaza Restaurants Pvt. Ltd. owns and operates McDonalds operations in northern India. There are 54 McDonalds restaurants in India employing over 2,000 people who serve more than 1.5 lakh customers across the country every day. an issue. McDonalds either does outright purchase or enters into long lease of 25 years. Rent control laws, housing societies unwilling to enter into long term leases and required clearances from multiple authorities made acquisition of real estate a difficult proposition.

Factors for success

McDonalds India overcame all these challenges by focusing on its core values of delivering quality products, served in a friendly environment, in a clean place, at affordable prices, to set up its growing network of outlets. Several factors contributed to this:

Global support with local management

McDonalds India is a joint-venture company managed by Indians with complete flexibility to run the business. The India team brought local knowledge into the JV. The Indian team also brought in entrepreneurial drive to make the business a success, given the unique challenges the country presented. McDonalds Corporation provided strong support to the local management in several ways. It trained the Indian management extensively before commencing operations, in order to ensure adherence to its commitments on quality, service, cleanliness and value and enable standardisation of the service in sync with the global experience. International experts in different areas were also sent to establish the business in India. Setting up this extensive cold chain distribution system took six years and has involved the transfer of stateof-the-art food processing technology by McDonalds and its international suppliers to Indian enterprises. McDonalds identified and developed local entrepreneurs as suppliers for its India business. Global suppliers of McDonalds collaborated with them to facilitate transfer of technology and expertise. products in the global menu of McDonalds were adapted for India.

India challenges
Prior to McDonalds entering India there was no concept of such a food category. This meant low product awareness and absence of the infrastructure (cold chain) and supply chain needed for such a business to be successful. Indian agriculture was tuned to producing for households and not for the processed food industry. While all this necessitated high investments in infrastructure creation, the consumer could not afford to pay high prices. Indians do not consume beef and there is a significant population which is strictly vegetarian. Availability of real estate is crucial for success in the retail business. Getting quality real estate was

Suitable pricing
McDonalds incurred high fixed costs in infrastructure and supplier creation in India. However, keeping in mind the price sensitivity of the customer, McDonalds adopted a large volume, low realization model of business. The company has taken a long-term view and priced its products appropriately.

Investment in the food supply chain

McDonalds made large investments in infrastructure and supplier development. It set up a cold chain, to cut down operational wastage and maintain the freshness and nutritional value of raw and processed food products. The cold chain involves procurement, warehousing, transportation and retailing of perishable food products - all under controlled temperatures.

Localisation
McDonalds carried out significant localisation of equipment that resulted in bringing down fixed costs. McDonalds suppliers were also brought in to set up equipment manufacturing plants in India. In addition, products were developed to suit Indian cost expectations and suitability to the palate. Some

Product customisation
McDonalds developed a menu especially for India with vegetarian selections to suit Indian tastes and culture. McDonalds does not offer any beef and pork items in India. McDonalds has re-engineered its

US COMPANIES IN INDIA

operations to address the special requirements of a vegetarian menu. In India, separation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, cooking and serving. Structured process for real estate acquisition Based on the initial experience, McDonalds India put in place a structured process for acquiring real estate space in the country. This has resulted in accelerating the process of acquisitions. As McDonalds brand image grew in the local market, housing societies became more willing to rent their premises to McDonalds. Lately, development of large malls all across the country mitigated to a large extent the real estate challenge for McDonalds.

Future plans
While India is viewed as a tough market with limited scale (McDonalds is opening 150 stores a year in China against 15- 20 in India), Indias outlook is positive and is considered a growth market. Currently, McDonalds has 54 outlets in more than 10 cities in India. The company plans to add 15 outlets a year at an investment of US$ 8.7 million (per 15 outlets). McDonalds is expected to double its investments from US$ 87 million that it has already invested to US$ 174 million by 2005. Fresh investments will be for expansion of McDonalds Indias supply chain, refurbishing its cold chain, and setting up more outlets. McDonalds is planning tie-ups with oil marketing companies for setting up McDonalds outlets at gas stations. Currently, there is one McDonalds outlet at a BPCL gas station and it is aiming at more such outlets with alliances with other companies as well. McDonalds is also eager to set up more outlets at places like railway stations, and is working on new product offerings like a fruit drink and desserts.

Leveraging the India Advantage

Vegetarian product development from India
India has become the source for all vegetarian items for McDonalds worldwide. Some examples of products developed in India and rolled out in other countries are Pizza McPuff, McAloo Tikki burger and McCurry Pan.

McDonalds India: AT A GLANCE

McDonalds Corporation: One of the worlds most well-known and valuable brands. 30,000 restaurants. 119 countries. 47 million customers every day McDonalds India: 54 restaurants. 2,000 employees. Serving 1.5 lakh customers every day Factors for success: Global support, local management. Investment in food supply chain. Localisation. Suitable pricing. Product customisation. Structured process for real estate acquisition. Vegetarian product development from India Future plans, India: Open 15 new outlets a year. Double investment to US$ 174 million. Tie-up for setting up outlets at gas stations

US COMPANIES IN INDIA