McDonald's - Business Strategy in India

Case Study Abstract

This case study discusses how McDonald's India managed to buck the trend in a struggling economy, its
early years and business strategy to get more out of its stores in India. The case also briefly discusses
how McDonald’s adapted to local culture in India, its localization and entry strategy, its strong supply
chain and pricing strategy.

Table of Contents

1. Introduction
2. McDonald’s entry into India
3. Exhibit I: McDonald’s – Country – Entry Year
4. The Indian Market – Top 10 per cent of the busiest markets globally
5. Localization Strategy
6. McDonald's JV in India
7. Initial Challenges - 'Culturally Sensitive' Food
8. Understanding Indian Customs and Culture
9. An Indianized Menu, Re-engineered operations and no beef burger
10. Competition – Major Competitors in India and Globally
11. McDonald’s – Quick Facts
12. Timeline of McDonald's in India
13. Pricing Strategy - The Rs-20 trap and ‘Purchasing Power Pricing’
14. Kiosks at store entrances for customers in a hurry
15. Home Delivery - McDonald’s Delivery Service or McDelivery
16. Out-of-home Breakfast - International McDonald’s format with local taste
17. McDonald’s Supply Chain Management (SCM)
18. Unique cold chain
19. Cutting costs
20. Exhibit II: McDonald’s Suppliers in India
21. Exhibit III: The Menu at McDonald’s India
22. Exhibit IV: McDonald’s – Early History and Growth
23. Exhibit V: Principles to McDonald’s business success
24. Questions for Discussion

Case Study Keywords: Fast-food Retailing, McDonald's India, Joint venture, Amit Jatia, Vikram Bakshi, localization strategy,
pricing strategy, McIndia, quick service restaurants, cultural adaptation, local culture, supply chain management, SCM, McDelivery,
unique cold chain

Case Questions for Discussion

1. McDonalds has become the poster brand for recession-resilient business. What is McDonald’s
doing right in India? What elements of its business strategy are working for it and how does it
manage to get more out of its stores?
2. Does local adaptation contribute to business growth in a country? Explain McDonald’s efforts to
adapt to the local culture in India. What challenges did McDonald’s face in India?
 3. Have you ever visited a McDonald’s store? Compare and contrast your experience with another
quick-service restaurant or fast-food joint you visited earlier. How can McDonald’s improve?
Should it alter its strategy?

http://www.scribd.com/doc/13142703/Marketing-MixMcdonalds-India
Now who doesn't know McDonald's? That unmistakable red logo with its golden-yellow arches
of the 'M' is a familiar sign to the world of fast food eaters in a lot of countries around the
world...and India is no stranger to it. But for most Westerners, to whom McDonald's may signify
the familiar taste of the Big Mac or the Double Cheese Beef Burger, the McDonalds Menu in
India may come as a bit of a surprise. Among other differences, the first thing an outsider will
notice is that the signature snack and probably the most recognizable symbol of this Fast Food
Giant is nowhere to be found in an Indian McDonald's....I'm talking about the Hamburger! You
heard me right- No Hamburgers. That's not to say the Indian McDonald outlets don't sell patties
on buns...it's just that...

There's No Beef or Pork in Any McDonald's in India...

While India is one of the biggest markets in the World, it is also
the only Country in the World, where McDonald's doesn't serve
any beef or pork in any form, in ANY of their 123 outlets (and
counting) across the country!

Instead of ground beef and pork patties, the McDonald's Menu in

India features Indian burgers that are 100 percent vegetarian -
burger look-a-likes of potatoes, peas, and carrots, with a little
Indian spice thrown in. So what most Indian kids grow up to
know as a hamburger, isn't really a hamburger.

Diets in India have been impacted by the many different religions in India for centuries now.
Hindus don't eat beef. Hindu believers consider the cow scared and holy, so harming a cow...let
alone eating its meat is considered a grave sin. Since a majority of the population are followers
of Hinduism, there is no beef on the McDonalds' menu in India. Hindu's and Muslims (also a
prominent religion in India), don't eat pork, so the McDonalds Corporation in India is quick to
point out on their website (mcdonaldsinindia.com) that not only is there no beef, there is no pork
or pork byproducts in any McDonalds restaurant in India.

That's not to say that McDonald's doesn't serve any non-vegetarian products in their Indian
restaurants. They do serve chicken burgers and still have the one Fish Burger...but if you're a
meat eater..then you'll be outnumbered with their vegetarian options.

What You Can Order at McDonald's in India...

The international menus of McDonald's offer some interesting and varied menu items, not found
in the United States or any other countries with the food chain. With almost most half the menu,
if not most of it vegetarian at McDonald's in India, it makes a good choice for diners who want
some healthy options - whether or not you are vegetarian!

Here's a glimpse of what you can order at McDonald's in India:

The Vegetarian Fare at McDonalds India:

- McVeggie:
The McVeggie sandwich starts with the oh-so-familiar sesame seed bun. In between the bread,
you'll find a vegetarian patty that is made from peas, carrots, green beans, red bell pepper,
potatoes, onions, rice, and seasoning. This vegetarian burger is garnished with lettuce, and has
mayonnaise made without eggs spread thickly on the bread.

- McAloo Tikki
Potatoes (aloo in Hindi) are a popular filling food item in India. McDonald's in India's McAloo
Tikki sandwich includes a patty made out of potatoes, peas, and spices. It also includes tomato
slices, onions, and vegetarian mayonnaise.

- Paneer Salsa Wrap:

Paneer is referred to as cottage cheese in India. McDonald's Paneer Salsa Wrap starts with a
small slab of paneer that has been dredged in a coating that is a cross between Mexican and
Cajun in flavor. It is fried and the paneer patty is wrapped in flatbread and topped with a salad
mixture that includes lettuce, red cabbage and celery and then is finished off with vegetarian
mayonnaise, salsa and cheddar cheese.

- Crispy Chinese:
McDonald's in India's Crispy Chinese sandwich is crispy, but very China. It's more an Indianized
Chinese. Nevertheless, this vegetarian patty is topped with a creamy Schezwan sauce and lettuce
which makes it a nice addition to the Indian vegetarian menu.

- Veg McCurry Pan:

If you are in the mood for something similar to pizza, but don't want a tomato-based sauce,
McDonald's Veg McCurry Pan is a good choice. It starts with a rectangular shaped crust that is
topped with a creamy sauce (made without eggs), and vegetables including broccoli, baby corn,
mushrooms and red bell pepper. It is then baked until the crust is crisp and the toppings are hot
and bubbly.

- Pizza McPuff:
The vegetarian Pizza McPuff also starts with a rectangular shaped crust, but instead of a creamy
sauce is flavored with a tomato-based sauce and then is topped with carrots, beans, bell peppers,
onions, peas and mozzarella cheese.

The Non-Vegetarian Fare at McDonalds India:

- Chicken Maharaja Mac:

The Indian version of the Big Mac at McDonalds in India, is the Chicken Maharaja Mac
sandwich which is made with 2 grilled chicken patties and is topped with onions, tomatoes,
cheese and a spicy mayonnaise.

- McChicken:
The McChicken in India is almost the same as its cousin by the same name in other McDonalds
around the world. It contains one breaded and fried chicken patty and is topped with lettuce and
vegetarian mayonnaise. It is similar in size (but not taste) to the spicy chicken sandwich on the
dollar menu at McDonalds restaurants in the U.S.

- Filet-O-Fish:
The Filet-O-Fish sandwich at McDonalds in India is the only
sandwich item on the menu that is exactly the same as the Filet-O-
Fish sandwich you might eat at a McDonalds in the U.S.

- Chicken McGrill:
The Chicken McGrill sandwich starts off with a thin grilled chicken
patty that is embellished with cilantro mayonnaise, onions and
tomatoes and is served on a toasted bun.

- Chicken McCurry Pan:

Chicken McCurry Pan is the same as its vegetarian version. It starts off
with a rectangle of dough and is topped with a tomato-curry sauce,
spiced with thyme, basil, and oregano. It is finished off with chicken,
bell peppers, and cheese and is baked till crisp and bubbly.

Apart from these specials that appear mainly in the Indian McDonald's here there are a couple of
things that are exactly the same in India as what you would consume at a McDonalds in the U.S.
or anywhere else. And that's McDonald's famous fries, shakes, and soft-serve ice-cream, both
sundaes and cones. And of course soft drinks are available as well!

FACTS
NEW YORK (CNN/Money) - McDonald's Corp., the world's biggest restaurant chain, has
named a new CEO after Jim Cantalupo died of an apparent heart attack Monday.

Here are key facts about the company.

Headquarters - Oak Brook, Illinois

Restaurants - More than 30,000 in 119 countries, serving 47 million customers a day.

Sales and earnings - Total revenue $17.1 billion* in 2003, up from $15.4 billion in 2002.

Net income $1.5 billion, or $1.15 a share, in 2003, up from $894 million, or 70 cents a share, in
2002.

Stock performance - The company went public in 1965, and is one of 30 stocks in the Dow
Jones industrial average. The stock is up about 10 percent year-to-date, making it the second-best
performer in the Dow Jones industrial average.

History - Ray Kroc opened the first McDonald's in Des Plaines, Illinois, in 1955, with an idea
from brothers Dick and Mac McDonald, who ran a fast-service hamburger outlet in San
Bernardino, Calif.

Kroc, then a milkshake machine distributor, met the brothers and pitched the idea of opening a
chain of fast-service restaurants.

*System-wide sales, includes franchisee owned locations.

Sources: Company reports, Reuters

McDonald's has locations across the world. They have made their mark on six continents, but they have
yet to open a fast food restaurant in Antarctica.

Everyday, some 46 million people turn to McDonald's for their instant satisfaction. While, the choices
they make may vary from country to country, you can bet that people are happy with the choices
McDonald's has to offer. Another fun fact is that Ronald McDonald speaks 25 different languages in
order to entertain all those people.

McDonald's has sold well over 100 billion hamburgers. This fact really isn't all that shocking when you
think about all the locations around the world. In fact, there are over 30,000 locations. That's a lot of
burgers being served up everyday
In England, you will find a McDonald's location that is housed by an extremely old building. In fact, one
of the walls of this location dates back to the 13th century. It's rare for McDonald's to have historic
locations here in America. Americans are known for building bigger and better things. Even the location
that housed the first McDonald's drive thru was tore down and rebuilt.

Mc delivery

 McDelivery Launched in Hyderabad

Dial 66000 666 to order your favourite McMeals right at your doorstep

Hyderabad:McDonald’s Family Restaurant, the world’s leading food service retailer,

announced the commencement of the McDelivery service in the city of Hyderabad allowing
McDonald’s lovers to relish their favourite menu at their very doorstep. Hyderabad is the
first city in the south where the service has been launched.

After an overwhelming response to the launch of all its restaurants, McDonald’s is further
set to pamper the city of Nawabs with its successful home delivery service. Currently, the
service is available in City Centre, Banjara Hills and at Rainbow Mall on Karkhana Road.

All you have to do is dial McDonald’s Home Delivery number - 6600 0666 and place your
order. There is no restriction on the minimum order for home delivery; however there is a
fee of Rs. 20 per order as delivery charges, irrespective of the size of the order.

Keeping in mind, McDonald’s commitment to quality, the service will be available to the
neighborhood which is up to 10 minutes away from the restaurant. On an average two
dedicated delivery bikes will be provided to both the stores. The mapping of the delivery
area is such that even during peak hours customers receive orders that are hot and fresh.
McDonald’s ensures that the quality of food is not compromised.

From the veggie’s favourite McAloo TikkiTM to the mouth watering Chicken McGrillTM
customers will be able to indulge in all of their favourite McDonald’s delights by simply
dialing 66 000 666.

Commenting on the McDelivery launch, Mr. Amit Jatia, MD & JV Partner, McDonald’s India
(West & South) said, "Convenience is the key to business models in McDonald’s. At
McDonald’s, our priority has always been customer service and convenience and the launch
of this new initiative in Hyderabad will allow our customers to enjoy McDonald’s meals at
the convenience of their homes / offices, if they are unable to come to our restaurants."

India is one of the few countries where McDonald’s provides home delivery service. In
Western India, this service is currently available in Mumbai, Pune & Gujarat market enabling
McDonald’s lovers to enjoy their favourite meals in the comfort of their home.
 Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had spent
more than six years to get the system into place. This system brought about a veritable revolution,
immensely benefiting the farmers at one end and enabling customers at retail counters get the highest
quality food products, absolutely fresh and at great value. Through its unique cold chain, McDonalds has
been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional
value of raw and processed food products. This has involved procurement, warehousing, transportation
and retailing of perishable food products, all under controlled temperatures. The following list of
suppliers, who build up the major supply chain of McDonalds, reveal how this ‘Cold Chain’ works and
contributes towards the efficiency of McDonalds

Case Updates/Snippets

 World’s leading food service retailer – McDonald’s has more than 32,000 restaurants serving over 50 million
customers each day in more than 119 countries.
 McDonald’s competitors in India – McDonald’s competes with fast food chains like Pizza Hut, Domino’s Pizza,
Papa John’s, Nirula’s and KFC in India.
 McDonald’s Supply Chain – McDonald’s has a dedicated supply chain in India and sources 99% of its products
from within the country. The company has strong backward integration right up to the farm level.
 Quick service restaurants in India – By October 2009, McDonald’s India had more than 170 quick service
restaurants in India. Domino’s Pizza, which began operations in India in January 1996, has over 275 stores across 55 cities
in the country. KFC has 46 restaurants across 11 cities in India. (KFC is one of the 5 brands owned by Yum!. KFC is a $12
billion global brand and a leading quick-service restaurant (QSR) in many countries.) Nirula’s, one of India’s oldest food
chains (completed 75 years in service in March 2009), has a network of around 62 outlets in five states across Northern
India. Nirula’s, established in 1934 has interests in hotels, restaurants, ice cream parlours, pastry shops and food processing
plants. Nirula’s was the first to introduce burgers in India.
 Food Industry in India – In India, food industry and particularly informal eating out market is very small. In
India, over quarter of a million customers visit McDonald’s family restaurants every day. The fast-food industry in India is
valued at Rs 3,000-crore.
 MFY (Made for You) food preparation platform – MFY is a unique concept (cooking method) where the food
is prepared as the customer places its order. All new upcoming McDonald’s restaurants are based on MFY. This cooking
method has helped McDonald’s further strengthen its food safety, hygiene and quality standards. McDonald’s has around 10
MFY restaurants in its portfolio.
 How McDonald’s manages to keep its prices down? – Fast-food chains face a tough time balancing between
margin pressures and hiking prices which can hurt volumes. Consequently, the chains have to increase rates or rework their
strategies. Affordability has been the cornerstone of McDonald’s global strategy. Some of its measures to achieve this
include – Bulk buying, long-term vendor contracts, and manufacturing efficiencies .
 McDelivery Online – In India, McDonald’s first launched home delivery of meals in Mumbai in 2004. McDonald’s
now has plans to launch web-based delivery service in India (across 75 McDelivery cities) in 2010, a pilot for which has
already been tested by it in Hyderabad. The company hopes to add 5 per cent to sales via Web delivery. McDonald’s web-
based delivery model will be based on serving the customer quickly wherein the drive time does not exceed seven minutes
because its food has to be eaten within ten minutes of preparation. The footfalls in India are amongst the highest in the
world, but the average bill is amongst the lowest.
 McDonald’s India in 2010 – In 2010, McDonald’s India plans to open 40 more outlets. The company has also
earmarked a budget of Rs 50-60 crore to market its new products and initiatives for consumers. Its new marketing
campaign is titled – ‘Har Chotti Khushi Ka Celebration’ – in other words ‘celebrate little joys of life’ where it positions
McDonald’s as a venue for enriching life of consumers.