CASE ST

TUDY: MCD
DONALD’S BUSINESS STRATEGI
S IES IN INDIA
A

McDona
ald’s

The modestt beginningss of McDonaald’s at Illinnois in USA,, turned out to be

among the main bran nd names inn the internnational sceene. It has been
synonymou us to what is widelyy-accepted tthe fast-foood concept. The
company op perates overr thirty one thhousand storres all over tthe world to date.
It was one of the firstt to perfect the conceptt of fast serrvice in the food
industry in its early dayys of operattions in 19555. Given thaat the produccts of
the compan ny are main nly westernn in characteer; its operrations havee also
expanded d to the Asiaan region. Th
he first Indiaan McDonalld’s outlet oppened in Muumbai in 19996. In
the rest of
o the globe, it operates thousands
t off store franchhises that funnctions autonomously.

McDona
ald’s in Indiia

Around the
t world, McDonald’s
M traditionally
t operates witth local parttners or locall managemeent. In
India tooo, McDonald d’s purchasees from loccal supplierss. McDonaldd’s construccts its restauurants
using loccal architectts, contractorrs, labour annd – where possible – local materiials. McDonnald’s
hires loccal personneel for all poositions with hin the restaaurants and contributes a portion oof its
success to communitties in the forrm of municcipal taxes annd reinvestm ment.

Six yearss prior to th

he opening ofo the first McDonald’s
M restaurant iin India, MccDonald’s annd its
internatio
onal supplierr partners worked togeth her with locaal Indian Coompanies to develop prooducts
that meett McDonald d’s rigorous quality
q stand
dards. Part oof this devellopment invoolves the traansfer
of state-o
of-the-art foo
od processinng technolog gy, which haas enabled IIndian businnesses to groow by
improvinng their abilitty to compette in today’ss internationaal markets.

McDonald’s worldw wide is welll known forr the high degree of rrespect to thhe local cuulture.
McDonald’s has dev veloped a meenu especiallly for India with vegetaarian selectioons to suit Inndian
tasted an
nd culture. Keeping
K ne with this McDonald’ s does not ooffer any beeef and pork items
in lin
in India. McDonald’’s has also re-engineere
r d its operatiions to addrress the speccial requirem
ments
ofa vegetarian menu u. The cheese and cold sauces
s usedd in India is 100% vegettarian. Vegeetable
products are prepareed separately y, using deddicated equippment and uutensils. Also in India, only
vegetablee oil is used
d as a cookiing medium m. This sepaaration of veegetarian annd non-vegettarian
food prodducts is mainntained throuughout the various
v stagees of procureement, cookiing and servving.

The McDDonald’s phiilosophy of Quality,

Q Servvice, Cleanliiness and Vaalue (QSC&
&V) is the guuiding
force beh
hind its serv
vice to the customers. McDonald’ s India servves only thee highest quuality
products. All McDonnald’s suppliiers adhere to
o Indian Govvernment regulations onn food, healthh and
hygiene while continuously maintaining their own recognized standards. All McDonald’s
products are prepared using the most current state-of-the-art cooking equipment to ensure quality
and safety. At McDonald’s, the customer always comes first. McDonald’s India provides fast
friendly service- the hallmark of McDonald’s that sets its restaurants apart from others.
McDonald’s restaurants provide a clean, comfortable environment especially suited for families.
This is achieved through McDonald’s stringent cleaning standards, carefully adhered to
McDonald’s menu is priced at a value that the largest segment of the Indian consumers can
afford. McDonald’s does not sacrifice quality for value – rather McDonald’s leverages
economies to minimize costs while maximizing value to customers. The company has invested
Rs 450 crore so far in its India operations out of its total planned investment of Rs 850 crore till
2007.

McDonald’s India Pvt. Ltd. has moved an application to the government seeking permission for
payment and remittance of the initial franchise fee and royalty to Mc Donald’s Corporation. The
permission has been sought on two grounds: McDonald’s India would pay an initial franchise fee
of $45,000 on each of the McDonald’s restaurants already franchised or to be franchised, in the
future, in India; and a royalty equal to 5 per cent of the gross sales from the operations of all its
Indian restaurants on a monthly basis to McDonald’s International. They currently serve around
5 million customers a day and hope to grow at the rate of 50% to 70% a year.

Business Model

 Franchise Model – Only 15% of the total number of restaurants are owned by the
Company. The remaining 85% is operated by franchisees. The company follows a
comprehensive framework of training and monitoring of its franchises to ensure that they
adhere to the Quality, Service, Cleanliness and Value propositions offered by the
company to its customers.

 Product Consistency – By developing a sophisticated supplier networked operation and

distribution system, the company has been able to achieve consistent product taste and
quality across geographies.

 Act like a retailer and think like a brand – McDonald’s focuses not only on delivering
sales for the immediate present, but also protecting its long term brand reputation.

Challenges in Entering Indian Markets

 Regiocentricism: Re-engineering the menu – McDonald’s has continually adapted to the

customer’s tastes, value systems, lifestyle, language and perception. Globally
McDonald’s was known for its hamburgers, beef and pork burgers. Most Indians are
barred by religion not to consume beef or pork. To survive, the company had to be
 responsive to the Indian sensitivities. So McDonald’s came up with chicken, lamb and
fish burgers to suite the Indian palate.

 The vegetarian customer – India has a huge population of vegetarians. To cater to this
customer segment, the company came up with a completely new line of vegetarian items
like Mc Veggie burger and Mc Aloo Tikki. The separation of vegetarian and non-
vegetarian sections is maintained throughout the various stages.

Product Positioning

“Mc Donald’s mein hai kuch baat” projects McDonald’s as a place for the whole family to enjoy.
When McDonald’s entered in India it was mainly perceived as targeting the urban upper class
people. Today it positions itself as an affordable place to eat without compromising on the
quality of food, service and hygiene. The outlet ambience and mild background music highlight
the comfort that McDonald’s promises in slogans like “You deserve a Break Today” & “Feed
your inner child”. This commitment of quality of food and service in a clean, hygienic and
relaxing atmosphere has ensured that McDonald’s maintains a positive relationship with the
customers.