Friday, 19 September 2014

This paper studies the strategic management analysis of Mc Donald’s India. The study will include the analysis of internal and external environment of the business and will recommend strategies and their implementation based on the competitive advantages and the weaknesses of the present system followed by the fast food chain in India.

1.     Introduction

Mc Donald’s India was established in 1996 as a joint venture between the McDonald Corporation and two Indian entrepreneurs Amit Jatia (MD of Hardcastle Restaurants Pvt. Ltd.) and Vikram Bakshi (Owner of Connaught Plaza Restaurants Pvt. Ltd.) While Amit heads business in the Southern and Western parts of India, Vikram manages for Northern and Eastern parts of India. (About Us retrieved from website of McDonald’s India on January 24, 2013; www.mcdonaldsindia.com)
The business model rests on four pillars, namely, fresh food, affordable prices, fast service and limited menu. All this has been possible since, the company invested its first four years in developing a unique cold chain – integrating the supply chain, which not only made possible the delivery of fresh food at controlled prices but also alleviated the farmer’s risk in food handling and quality management. However the need of the hour demands strongly revision of focus on limited menu due to the unique eating habits of the Indian consumer. 

2.     SWOT Analysis

The strengths, weaknesses, opportunities and threats faced by the business in its current environment have been listed below:

Strengths

1.       Flexibility and innovation- Dropped mutton, beef and hamburgers from menu and introduced various vegetarian offerings for children, family and individuals. Maharaja Mac is a great example of McDonald India’s innovation.
2.        Supply Chain Management- Investment in a unique cold chain has not only reduced prices of raw supplies but has also ensured timely delivery and fresh food for the consumer.
3.       Affordable Prices- The chain’s price offerings are such that attract various segments of the market to the counter.
4.       Centralised customer support service- has provided the company with insight into the target market and prompt services to the consumer. 

Weakness

1.       Limited Menu- When catering to a market where food restrictions and preferences vary greatly between communities. For example, Hindus don’t eat beef and Muslims don’t eat Pork.
2.       Unhealthy- Image of an unhealthy junk food retailer tarnishes the reputation of the brand.
3.       Inefficiencies in Home Delivery- In terms of lag in timely delivery and the service not being available at a lot of counters has eaten share of the company.
4.       Global warming- use of environment degrading material in packing has been the focus of criticism from various corners.

Opportunities

1.       Expansion- A fast growing population and a rising economy with promising trends is a great prospect for the fast food chain.
2.       Breakfast- By including breakfast food in its menu McDonald can attract a huge urban population which is commuting in the morning rush hour.
3.       Improving delivery- Hence capturing a lost market share.
4.       Eco friendly- approach to packing can win appraise of government and action groups improving public image.

Threats

1.       Healthy food preferences- of an increasingly obese population can be viewed as a threat to business.
2.       Competitors- Entry of various fast food brands in the Indian space has eaten into the share of McDonald’s.
3.       Local food- Consumption of locally produced fast food delicacies which are specifically Indian are a competition to the foreign brand. For example, Aloo Tikki an Indian burger is quite popular among the masses.

3.     External Analysis (General Environment)

In this section we’d analyse the business’ macro external environment. This will be done largely by means of a PEST analysis, which stands for analysis of Political, Economic, Social and Technological climate. Additionally we will also study the influence of Demographic trends in this section.
3.1. Demographic Trends
With a 1.2 Billion Indian population and rising (Population data retrieved from Google database on January 24, 2013; www.google.co.in/publicdata), the demographic trends in the country influence greatly business decisions. Enlisted below are some of the major trends determining McDonald India’s business practices:
a)      Rising incomes- Increasing GDP and economic progress is putting greater purchasing power in the hand of larger part of the population, opening them up to international brands such as McDonald’s.
b)      Urbanisation- With an ever growing urban population constantly on the move with a lack of time, players like McDonalds in the quick food and service arena have an opportunity to encash.
c)       Diet Diversification- With the moneyed consumer opening up in terms of food choices is of relevance to the fast food industry which mobilises international tastes in local markets. (Retrieved from the website of the government of New Zealand on January 24, 2013; www.nzte.govt.nz/explore-export-markets/market-research-by-industry/Food-and-beverage/Pages/Food-and-beverage-in-India.aspx)
d)      Meal portion and timings- With an ever running paucity of time, and a large working population, players like McDonald’s play an important role to cater to the disruption of traditional meal times and portion sizes by introducing food on the go available in different variants and sizes.
e)      Health Consciousness- With an ever aging and largely unhealthy and obese population in India focus is now turning to healthier food options like those provided by Subway. Therefore, players in the fast food industry should adapt to such trends in order to grow.

3.2. Political/legal trends
To function in the world’s largest democracy, one cannot ignore the influence of politics on business. Same is the case for McDonald’s in India:
a)      Nationalistic Emotion- India being a nationalistic country poses a huge barrier for foreign entrants into the domestic markets. A leading national party BJP has been known to influence nationalistic emotions promoting vegetarian food in indigenous restaurants strongly campaigning against foreign fast food. However, the current ruling party being Congress (a more liberal ideology), has encouraged global business in domestic climes.
b)      Complex legal and bureaucratic system- A country ridden with corruption and red tape, poses complexities for business environment; often jeopardising interest of foreign holdings or, slowing down the justice mechanism due to red tape. This has been the reason for McDonald’s involvement in lot of legal and political controversies of late.

3.3.  Economic Conditions
India as leading economy in a developing world has opened up new frontiers and benefits for McDonald’s. Some of the major ones are:
a)      Booming economy- With among one of the highest GDP in the developing world, has meant larger incomes for McDonald’s India.
b)      Low tax rate- and tax holidays in certain industries and regions to promote economic development have surely benefitted McDonald’s too.
c)       Abundance of Labour- With the world’s second largest population in India (Retreived from about.com on January 24, 2013; geography.about.com/od/obtainpopulationdata/a/indiapopulation.htm), there is no dearth of cheap skilled, unskilled and semi skilled labour, reducing costs for McDonald’s.  

3.4. Socio Cultural Conditions
In India society and religion play a pivotal role in the success of a business.
a)      Religion- With the existence of diverse communities in the subcontinent, India has over 14 broad classifications of cuisine types. Such wide differences make it even more complex for limited menu operators like McDonald’s to make an offering attractive to all. Initially McDonald’s was caught up in a row over the rumor of servicing beef and pork in its products, which was not liked by major sections of Hindus and Muslims.
b)      Growing Middle Class- With the rise of middle class population there has been a spurt in consumerism and demonstration effect, a phenomena which has benefitted international fast food companies due to the increase in consumption expenditure.

3.5.  Technological Influences
To operate in a competitive environment such as India, McDonald’s uses a variety of technology inside its stores as well as in supply chain management to keep its promise of fresh food at affordable prices with the best service in Industry.
Therefore, it is not surprising that McDonald invested a lot of time and money in developing a unique cold chain system in the formative years in India. It also employs update machinery and approaches such as Just-In-Time in stores to serve its customers better.

4.     External Analysis (Competitive Environment)

This section will study the micro external environment of McDonald’s India. This will be detailed by analysing the immediate atmosphere McDonald’s operates in, by means of Michael Porter’s model;
4.1. Intensity of rivalry among competitors
In India McDonald’s not only faces rivalry from international competitors such as Pizza Hut, Subway, KFC, etc. but also is vulnerable at the hands of local competition like food stalls, local restaurants and Indian fast food chains such as Sagar Ratna.
High exit barriers in terms of high exit costs force companies to fight aggressively for survival. On the other hand, low switching costs for consumers to try different brands and fast food providers, reduces customer engagement.

4.2. The threat of new entrants
High entry costs keep new entrants at bay. Large costs involved in research and development, and establishing a brand name are a hurdle for new businesses in fast food sector. Also the cost of storage of perishable goods and good supply chain management, guard the interests of McDonald’s in India. However the real threat is from ever expanding local brands like Southy, Sagar Ratna, Bittoo Tikki Wala, Nirulas and the like.

4.3. The threat of substitutes
Availability of substitutes in form of international brands KFC, Pizza Hut, Dominos and the like , and fast food joints serving local cuisine is a threat to market share of McDonald’s in India too.
Moreover low switching costs for consumers to try different brands has made it even more difficult to retain customer’s loyalty to the brand.

4.4. Suppliers
As elucidated earlier in the paper, establishing a distinct cold chain system in India has been the focus of McDonald’s for the first six years. It has been able to integrate the total supply chain system in to its general working, ensuring a ready availability of fresh raw supplies; at controlled prices which are guarded against general volatility of the Indian agrarian market. This helps McDonald’s to have a greater bargaining power over its suppliers ensuring consistent prices and quality to its customers.

4.5. Customers
Due to factors such as low switching costs for consumers and availability of plethora of substitutes, McDonald’s India has to adopt practices to adapt to consumer preferences in India. Consumer choices such as spicy food, use of eco friendly materials and consumption of take away food has motivated McDonald’s to adapt to such preferences in order to attract the high, low and middle income group it targets in India.

5.     Internal Environment Analysis

After going through the analysis of the external environment faced by McDonald’s India, it is even more critical to examine the internal environment, in order to recommend a future course of action.
5.1. Resource Types
a)      Labour- McDonald’s in India employs local labor, thus benefitting from low costs of employment as well as garnering local support by training more people in its system and acquainting them of its benefits.
b)      Supply chain management- McDonald’s India has created a unique cold chain which benefits in terms of on time delivery of fresh raw supplies at controlled prices thereby delivering the best to the consumer at affordable prices; maintaining a consistency in quality simultaneously.
c)       Up to date technology- as modern machinery and processes such as just in time are followed to ensure lowering of cost and delivering of quality products to the consumer.

5.2. Firm’s Capabilities
a)      Adapting and Innovating- One of the core strength of McDonald’s India has been adapting and to the Indian culture and tastes. It has shown business prudence by dropping non vegetarian food on its menus initially and carefully handling the matter of beef and pork, in order to avoid hurting sentiments of certain sections of the society. Currently the fast food giant is operating in various formats to support the lifestyles of a growing urban Indian population.
b)      Plethora of economic resources and influence- McDonald’s being one of the biggest brands in recent history of the world, commands huge economic resources and reputation. This only goes further in strengthening its position in India and intimidating competition.

6.     Recommendations and Conclusion

Now that we have studied the SWOT analysis, External environment and internal environment of McDonald’s India, we can conclude with evidence that McDonald surely is the king of fast food retail. A thorough analysis of its operations has revealed that its core strength lie in Innovating, adapting, customer service, customisation, good management and unmatched marketing strategies (retrieved from blog posts on January 24, 2013; www.mcdonaldsindia.blogspot.in).
However the following pointers must be considered as recommendations for future course of action:
a)      Home Delivery- McDonald’s should focus on improving its home delivery model; that is making it faster and available throughout. This can bring a whole new market share to the kitty.
b)      Expansion- as the population increases, income rises and rapid urbanisation is the order of the day; McDonald’s should focus on reaching out to more people. There’s a scope for opening up to even more locations and catering to a diverse taste.

c)       Global Warming- The fast food retailer should focus on reducing its carbon footprint; this will not fulfil the duties under corporate social responsibility but, will also generate a positive word for the organisation.  


CASE:

Project Description:

As marketing communications experts, your consulting group has been asked 

by Cadbury’s Marketing Director to help design an integrated marketing 

communications (IMC) plan which supports Cadbury’s domestic marketing effort 

for one of it’s key products Cherry Ripe. This plan should focus on promoting an 

effectively re-launching for Cherry Ripe to a domestic market segment, and may 

involve identifying a new target audience/product market (within Australia). You 

will recommend communication tools and creative strategy/appeals to best reach 

the identified target audience segment. You will also design and cost the media plan 

needed to articulate the communication objectives and strategies detailed in your IMC 

plan. 

As professionals, you must present a professionally-written report which gives logical 

reasoning and justification for all of your choices and recommendations, supported 

by relevant theory from your text and other academic sources (properly referenced). 

Whilst a unique, creative approach is encouraged, your plan will also need to promote 

Cherry Ripe in a consistent integrated way in line with its overall marketing strategy. 

Your report will need to include the following:

1. A specified timeframe/duration for the implementation of your IMC plan

2. A specific target audience (properly described/profiled) 

3. Specific communication objectives, linked to marketing objective/s

4. Creative strategies, showing a direct and logical link to each communication 

objective and your target audience

5. A media plan, which links selected media vehicles to your creative strategy 

and your target audience

6. A detailed media schedule and indicative budget.

7. Clear rationale which links the above elements to your target audience and to 

each other in a logical sequence

During weeks 2 and 3, students will be placed in groups to complete this task.


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