McDonalds in India

1.      Company Background

McDonalds, one of the world’s largest and best known fast-food chains, had very humble origins as a drive-in restaurant in San Bernardino in California in 1948. McDonalds was formally incorporated as McDonald’s Corporation in the year 1955 by Ray Kroc in 1955, who opened the first restaurant under the corporation in Des Plaines, Illinois, near Chicago, on April 15, 1955. Throughout the years McDonalds Corporation has grown phenomenally, and has now more than 30,000 restaurants in about 120 countries around the world, with about 50 million customers served per day (McDonald’s Corporation 2004)

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Due to the liberalization policies introduced in 1991 the foreign companies for the first time had a decent chance of opening their ventures in India. Following these policy changes a number of U.S.-based fast food chains like KFC and Pizza Hut rushed to the Indian market in the early 1990s policies, McDonald’s did not enter the Indian market until 1996. Instead, it spent about six years in planning, extensively researching Indian consumer tastes, product development, and supply chain arrangement before opening its first outlet in 1996 (Dash 2005)

Thus, the McDonalds Indian operation was started in the year 1996, with the first outlet opened in the month of October in New Delhi. McDonalds in India is actually a fifty-fifty joint venture partnership run by Indians. The two companies are Hardcastle Restaurants Pvt. Ltd owned by Amit Jatla, who operates the McDonalds outlets in Western India; and Connaught Plaza Restaurants Pvt. Ltd. owned by Vikram Bakshi , who operates the outlets in northern India. Currently there are about 56 restaurants throughout India employing over 2000 Indians.  The outlets serve about half a million customers per day on an average. McDonalds India does not have a franchise option. The two restaurants mentioned above, either buy or take premises on a long-term arrangement (McDonalds India 2005)

 

2.      Products and Services

As a result of its research McDonalds found out a lot about the testes and preferences of Indian customers and designed a corresponding Menu specifically catering to the tastes of Indian people. For its success McDonalds had to face two huge challenges. The first was to get past hurting the religious sentiments of Indian people, and the second was not to give a chance to the politicians to label the corporation as a unfriendly foreign company. Working the first front McDonalds removed the possibility of beef and pork in their products, as the former was a strict no-no for the Hindus, while the later was not preferred by Muslims. There were many product innovations done for this purpose, the first of them was replacing beef and pork based products by the unobtrusive mutton. Another innovation was the McAloo Tikki Burger, to make the products have a purely vegetarian feel for people. In fact approximately 75% of the menu available in McDonald’s in India is Indianized and specifically designed to woo Indian customers. This additionally shows that the corporation respects the Indian culture. The Indianised food concept is not just limited to product innovations; the spices used are also predominantly Indian. In addition vegetarian and non-vegetarian based products are separated during procurement, cooking and serving of the dishes. McDonalds also wishes to tune its image of being only a fast-food restaurant. It plans on adding health food options to its product lists in terms of offering more baked or toasted options as opposed to fried patties. McCurry Pan, introduced in 2003, was the first baked dish option (Dash 2005)

Following is a sample exhibit of the products served by McDonalds in India.

(http://road.uww.edu/road/parbotek/250-777/Week%203%20-%20McDonald’s.pdf)

 

3.      Target Consumers

The primary target customers of McDonalds have always been children. This target customer segment was spotted by Ray Kroc, and has since been followed throughout all its franchises. The idea behind is that families will follow where children wish to go. In India this means an entire section comprising of the very old people to adults and teenagers. There has however been a growing trend for targeting many other segments like corporate people, the primary target in India however remains the family, as is very clear from its advertisements (Dash 2005)

4.      International Marketing Strategy

a.            Product – One of the main reasons for the brand popularity of McDonalds in India is the variety of products available. There is a lot of effort spent on the customization of product according to the tastes of people. India is in fact the largest market for vegetarian based products of McDonalds. This ensures the reach of the company among the various segments of people with a wide variety of eating habits. Even the regular products are customized by making them more Indianised by adding Indian spices. Some examples of products developed in India and rolled out in other countries are Pizza McPuff, McAloo Tikki burger and McCurry Pan (India-info)

b.            Price – The main reasons for the growth of McDonalds in India is attributed to its pricing strategy. While McDonald’s incurred high fixed costs in infrastructure and supplier creation in India. it has adopted a large volume, low realization model of business. The company has taken a long-term view and priced its products appropriately. There are products available in every price segment with the lowest-cost burger starting from Rs 20 (or 05 dollars approx). While McDonald’s has achieved success by tapping middle-class households worldwide, in India the majority buyers are the rich and upper-middleclass population. The middle class population still remains to be effectively tapped. (Dash 2005)

c.             Promotion – McDonalds focuses its advertisements on being a place where

families could go for any kind of outing. The USP of the advertisements is that

people can have fun at these places, which is targeted at almost all the

consumer segments. In addition the company also focuses on promotional

campaigns from time to time.  “An example was ‘Music Meal, launched in

April     2005 in association with Coca-Cola India and Universal Music India,

which  became  extremely popular with young men and women” (Dash 2005)

d.            Place – Initially McDonalds opened its outlets only in Delhi and Mumbai due to

affordability and brand recognition factors. The places were sufficiently

exposed to the western culture due to their metropolitan culture. Also these

places had the largest percentage of urban population in the rich and upper

middle class zones, who were willing to try new eateries. The next lines of

outlets were opened in satellite cities i.e. near to Deli and Mumbai like Noida

and Pune respectively. Expansion continued to cities with tourist appeals like

Shimla and cities with eat out culture like Ahemadabad and Bangalore.

Hyderabad is the latest addition into the city list of McDonalds expansion plans

(Dash 2005)

5.      Sales Forecast

McDonalds sees India as a market with a lot of expansion capability. The main reason for this is the fast growth in economy which has led to a higher purchasing power in the hands of people. It is planning to open about 15-20 outlets in India as a target per year. However, India is viewed as a tough market with limited scale. Currently, McDonald’s 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. In addition they also plan to double this investment  to US$ 174 million. Fresh investments will be for expansion of McDonald’s India’s supply chain, refurbishing its cold chain, and setting up more outlets (India – info)

McDonald’s is planning tie-ups with oil marketing companies for setting up McDonald’s outlets at gas stations. McDonald’s 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. (India –info)

 

 

6.      Conclusion

While McDonalds may still remain as the choice for people in the rich an middle class segments, the growth of this section itself in the Indian economy, due to the rapid development, means that the future of McDonalds in India is good. However, the company needs to focus of continuous innovation of products, and also think about expanding to other cites, instead of just concentrating on strategic metros and suburbs (Dash 2005)

 

 

References

 

Dash K, “McDonalds in India”, The Garvin School of International Management,

2005, http://road.uww.edu/road/parbotek/250-777/Week%203%20-%20McDonald’s.pdf

 

India-info, McDonald’s Corporation, US Companies in India, http://www.india-now.org/download/McDonalds.pdf

 

McDonalds India, March 2005

http://www.mcdonaldsindia.com/aboutus/faqs-mcdonalds.html

 

McDonald’s Corporation, International Directory of Company Histories, Vol.63. St.

James Press, 2004. http://www.fundinguniverse.com/company-histories/McDonalds-Corporation-Company-History.html

 

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