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.
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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.
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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.
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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.
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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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